Mazzocchi Bus Co. v. Commissioner

14 F.3d 923 (1994)

From our private database of 46,000+ case briefs, written and edited by humans—never with AI.

Mazzocchi Bus Co. v. Commissioner

United States Court of Appeals for the Third Circuit
14 F.3d 923 (1994)

Facts

Nicholas Mazzocchi (plaintiff) diverted funds from closely held corporation Mazzocchi Bus Company, Inc. (MBC) (plaintiff). These funds were not reported either by Mazzocchi on his individual tax returns or by MBC on its corporate returns. Mazzocchi had pleaded guilty in an earlier proceeding for criminal income tax evasion on his diversion of these funds. Mazzocchi and MBC were also assessed income tax deficiencies for the years 1974–1979 by the commissioner of the Internal Revenue Service (defendant). Mazzocchi and MBC disputed the assessments in the United States Tax Court. MBC used the cash method of accounting, in which all income or expenses were recognized for tax purposes during the tax year in which they were received or paid. However, Mazzocchi and MBC contended that the tax liabilities for the diverted funds should be deducted from MBC’s earnings and profits in the year the liabilities accrued, as would occur if MBC used the accrual method of accounting, in which income and expenses were recognized at the time the right or obligation existed. Attributing the unpaid taxes to the year that they accrued would mean that MBC’s earnings for that year would be reduced. Thus, any amounts diverted by Mazzocchi in excess of earnings for that year would be characterized as nontaxable return of investment or capital gains rather than as dividends that were taxable at the higher, ordinary income rates. The United States Tax Court rejected this argument and ruled in the commissioner’s favor. MBC and Mazzocchi appealed to the United States Court of Appeals for the Third Circuit.

Rule of Law

Issue

Holding and Reasoning (Becker, 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 742,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.

    Unlock this case briefRead 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.

    Learn about our approachRead more about Quimbee

Here's why 742,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 46,000 briefs, keyed to 986 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.

Access this case brief for FREE

With a 7-day free trial membership
Here's why 742,000 law students have relied on our case briefs:
  • Reliable - written by law professors and practitioners, not other law students
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents
  • Access in your class - works on your mobile and tablet
  • 46,000 briefs - keyed to 986 casebooks
  • Uniform format for every case brief
  • Written in plain English - not in legalese and not just repeating the court's language
  • Massive library of related video lessons - and practice questions
  • Top-notch customer support

Access this case brief for FREE

With a 7-day free trial membership