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Sproull v. Commissioner
United States Tax Court
16 T.C. 244 (1951)
In 1929 E. T. Sproull (plaintiff) became a large stockholder and president of Brainerd Steel Corporation. He originally earned a $12,000 salary but voluntarily decreased his salary as the company struggled financially through the Great Depression. The company rebounded in 1945, and the board of directors set up a trust fund for Sproull to compensate him for his past services. Although Sproull and his family controlled about a quarter of the company’s stock, Sproull did not initiate or direct setting up the trust. The company paid the trustee $10,500 on December 31, 1945, and recorded that amount as a corporate salary expense for that year. The trust paid out $5,250 to Sproull in December 1946 and the remainder in December 1947. However, the tax commissioner (defendant) included the entire $10,500 in Sproull’s taxable income for 1945, when he could not access the funds in the trust. Sproull sued, claiming the commissioner taxed him in the wrong year.
Rule of Law
Holding and Reasoning (Tietjens, J.)
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