Biddle v. Commissioner of Internal Revenue

302 U.S. 573, 58 S. Ct. 379, 82 L. Ed. 431 (1938)

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Biddle v. Commissioner of Internal Revenue

United States Supreme Court
302 U.S. 573, 58 S. Ct. 379, 82 L. Ed. 431 (1938)

JC

Facts

Biddle (plaintiff) was an American taxpayer who received cash dividends from stock in British corporations. This suit was a consolidation of multiple similar cases. British corporations paid the taxes on such dividends at the point of profits, meaning the British corporation itself either paid or at least was responsible for paying the normal rate taxes. A surtax was then charged to individuals whose income exceeded a certain amount. In such cases, the British entity then sent a statement indicating the gross amount from which the taxes appropriate were deducted, the rate and amount of income tax appropriate to that gross amount, and the net amount paid. The British corporations had the right to either subtract the tax before distribution or declare a dividend free of tax, in which case the taxpayer was shown the tax appropriate for the dividend and paid that remaining amount. The mechanics of this were to allow taxpayers not subject to the surtax to claim a rebate. Biddle included the sums reported in the British returns in his gross income. Biddle then claimed as credit the amount of British tax appropriate to the dividends and the amount of surtax paid. The Commissioner of Internal Revenue (the commissioner) (defendant) assessed a deficiency against this practice. The commissioner argued that the tax appropriate was not actually the amount of income taxes paid by the taxpayer but rather by the corporation and thus must not be credited as taxes paid. Biddle argued that the nature of British taxation essentially meant that he should be allowed to credit the tax appropriate to the dividend, or if not, Biddle must at least be able to offset his gross income by this amount.

Rule of Law

Issue

Holding and Reasoning (Stone, J.)

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