Eder et al. v. Commissioner of Internal Revenue

138 F.2d 27 (1943)

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Eder et al. v. Commissioner of Internal Revenue

United States Court of Appeals for the Second Circuit
138 F.2d 27 (1943)

JC

Facts

Phanor Eder (plaintiff) was an American attorney who specialized in Colombian law. In 1938, Eder spent about two months in Colombia. Eder, Eder’s wife, son, and daughter each owned 25 percent of the stock in the Colombian Investment Company of South America, a controlled foreign corporation. The company had some earnings, but until March or April 1938, none of the money could be transferred from Colombia. After 1938, the company could transfer only $1,000 per month. The company transferred as much as it could, but on 1938 tax returns, each of the Eders reported undistributed net income from the remaining funds that could not be transferred. The Commissioner of Internal Revenue (the commissioner) (defendant) found that these funds were taxable and identified deficiencies in the value of the not-yet-distributed income. Eder filed suit to obtain a refund, but the United States Tax Court ruled for the commissioner. Eder appealed, arguing that he should not be taxed on the blocked income because Eder could not use the income in the United States. The government argued that the bar to distribution of the income did not change the income’s taxability.

Rule of Law

Issue

Holding and Reasoning (Frank, J.)

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