RESPONDENT:Commissioner of Internal Revenue
DOCKET NO.: 75-1312
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Seventh Circuit
CITATION: 429 US 569 (1977)
ARGUED: Dec 08, 1976
DECIDED: Feb 22, 1977
Keith A. Jones – for respondent
Marvin L. Schrager – for petitioner
Facts of the case
Media for Don E. Williams Company v. Commissioner of Internal Revenue
Audio Transcription for Opinion Announcement – February 22, 1977 in Don E. Williams Company v. Commissioner of Internal Revenue
Warren E. Burger:
The judgment and opinion of the Court in 75-1312, Williams against the Commissioner of Internal Revenue will be announced by Mr. Justice Blackmun.
Harry A. Blackmun:
This is a Federal Income Tax case coming to us from the United States Court of Appeals for the Seventh Circuit.
The petitioner is an accrual basis corporate taxpayer.
It has a qualified employees profit sharing trust.
The issue is whether the taxpayer corporation is entitled to a deduction under Section 404 (a) of the Internal Revenue Code when it delivers a fully secured promissory demand note to the trustees of that trust.
The statute allows a deduction for contributions paid by an employer to such a trust, and the question therefore is whether payment was made by the taxpayer when it delivered its note rather than cash or other property.
The United States Tax Court consistently has held that the deduction is not allowable.
The Third and the Ninth, and Tenth Circuit Courts of Appeals have held the other way, and the Seventh Circuit in the present case agreed with the Tax Court, so we took the case to resolve the conflict.
An opinion filed today with the clerk, we agree with the Tax Court on the Seventh Circuit and disagree with the other Court of Appeals.
We hold that the statutory term “paid” demonstrates that regardless of the method of accounting.
The taxpayer must payout cash or its equivalent in order to qualify for the deduction under Section 404 (a).
Mr. Justice Stevens has — joins the opinion but has filed a concurring statement and I’m authorized to say that Mr. Justice Stewart has filed a dissenting opinion and has joined in that opinion by Mr. Justice Powell.
Warren E. Burger:
Thank you Mr. Justice Blackmun.