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Burnet v. Sanford & Brooks Co. Case Brief
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Case Brief Summary & Legal Analysis
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.
Burnet v. Sanford & Brooks Co. Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
From 1913 to 1916, Sanford & Brooks Co. incurred net losses of $176,271.88 performing a dredging contract for the United States. The company deducted these expenses on its annual income tax returns for those years. In 1916, the company sued the U.S. for breach of warranty concerning the character of the material to be dredged. In 1920, the company received a judgment of $192,577.59, which included the $176,271.88 to compensate for its prior losses, plus interest. Sanford & Brooks did not include this recovery in its gross income for its 1920 tax return, arguing that the payment was a non-taxable return of losses and that the overall transaction yielded no profit. The Commissioner of Internal Revenue assessed a deficiency, treating the entire recovery as income for 1920. The Court of Appeals reversed, holding that the reimbursement of prior losses was not income. The Supreme Court granted certiorari to resolve the issue.
Court Holding & Legal Precedent
Issue: Must a taxpayer include in its gross income for a given year a payment received in that year which serves as reimbursement for expenses incurred and deducted as losses in prior tax years?
Yes. The entire amount received by the taxpayer in 1920, including the Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute iru
IRAC Legal Analysis
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IRAC (Issue, Rule, Analysis, Conclusion) is the exact format professors want to see in your exam answers. Our exclusive Flash-to-Full briefs combine holding, analysis, and rule statements formatted to match what A+ students produce in exams. These structured briefs help reinforce the essential legal reasoning patterns expected in law school.
Legal Issue
Must a taxpayer include in its gross income for a given year a payment received in that year which serves as reimbursement for expenses incurred and deducted as losses in prior tax years?
Conclusion
This decision cemented the annual accounting principle, mandating that tax liability is Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip e
Legal Rule
Under the Revenue Act of 1918, income tax is assessed on the Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat
Legal Analysis
The Supreme Court established the annual accounting principle as a fundamental concept Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt moll
Flash-to-Full Case Opinions
Flash Summary
- Establishes the annual accounting principle: income is computed and taxed based