Quimbee logo
DMCA.com Protection Status
From our private database of 18,400+ case briefs...

Knetsch v. United States

United States Supreme Court
364 U.S. 361 (1960)


Karl Knetsch (plaintiff) bought deferred annuity bonds from an insurance company to serve as tax shelters. The insurance company loaned Knetsch the funds to purchase the bonds. The insurance company also permitted Knetsch to borrow additional amounts against the bonds as their value increased. Knetsch borrowed substantial funds against the annuity bonds and deducted the interest payments on the loans on his federal tax returns. Because Knetsch borrowed significantly against the annuity bonds’ value, their expected payout upon maturity, when Knetsch would be 90 years old, was negligible. The net result of the annuity bonds on Knetsch’s federal tax liability was that the bonds yielded interest deductions well in excess of Knetsch’s investments in the bonds and had no meaningful financial value beyond the tax deductions. The federal tax commissioner (commissioner) (defendant) disallowed Knetsch’s interest deductions. Knetsch brought an action against the United States government (defendant) in federal district court, seeking a tax refund. The district court determined that Knetsch’s interest payments were a sham, as the annuity-bond transaction had no economic substance, and entered judgment for the commissioner. The court of appeals affirmed. The United States Supreme Court granted certiorari.

Rule of Law


Holding and Reasoning (Brennan, J.)

Dissent (Douglas, J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 497,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.

Here's why 497,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 18,400 briefs, keyed to 985 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Questions & Answers

Have a question about this case?

Sign up for a free 7-day trial and ask it

Sign up for a FREE 7-day trial