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North American Oil Consolidated v. Burnet

United States Supreme Court
286 U.S. 417 (1932)


Facts

North American Oil Consolidated (NAOC) (plaintiff) operated a section of oil land owned by the United States. The government sued to oust NAOC in 1916, and a receiver was appointed to manage the property and retain the net profits until the case was decided. In 1917, NAOC won the lawsuit, and the receiver paid the company $171,979.22 in net profits from 1916. The government appealed to the Court of Appeals for the Ninth Circuit, which affirmed. NAOC did not initially report the 1916 net profits as income on its tax return. However, in 1918, NAOC filed an amended return and included the profits. Burnet (defendant), the Commissioner of Internal Revenue, audited NAOC’s 1917 return and found a deficiency for unrelated reasons. NAOC appealed the deficiency to the Board of Tax Appeals, but Burnet sought to increase the deficiency to reflect the receiver’s 1917 payment to NAOC. The Board held that the income was taxable to the receiver, not NAOC. Burnet appealed to the Ninth Circuit, which held that the amount was taxable to NAOC in 1917, without regard to whether it used the cash-receipts-and-disbursements basis or accrual basis. NAOC petitioned the Supreme Court for certiorari, which was granted.

Rule of Law

Issue

Holding and Reasoning (Brandeis, J.)

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