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Burnet v. Sanford & Brooks Co.
Supreme Court of the United States (1931) | 282 U.S. 359; 51 S. Ct. 150; 75 L. Ed. 383; 1931 U.S. LEXIS 7; 1 C.B. 363; 9 A.F.T.R. (P-H) 603; 2 U.S. Tax Cas. (CCH) 636
TL;DR: A company received a lawsuit payment in 1920 that reimbursed it for losses on a contract from 1913-1916. The Supreme Court held the entire payment was taxable income in 1920, establishing the foundational 'annual accounting principle' for tax purposes.
Legal Significance: This case is the cornerstone of the annual accounting principle in U.S. tax law, establishing that income is taxed based on fixed annual periods, regardless of whether the underlying transaction spans multiple years or ultimately results in a net profit.