RESPONDENT: United States
LOCATION: Location of alleged robbery
DOCKET NO.: 74-22
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Fifth Circuit
CITATION: 422 US 617 (1975)
ARGUED: Apr 15, 1975 / Apr 16, 1975
DECIDED: Jun 26, 1975
Kirk M. McAlpin -
Kirk McAlpin - for petitioner
Scott P. Crampton - for respondent
Facts of the case
Media for Ivan Allen Company v. United StatesAudio Transcription for Oral Argument - April 15, 1975 in Ivan Allen Company v. United States
Audio Transcription for Oral Argument - April 16, 1975 in Ivan Allen Company v. United States
Audio Transcription for Opinion Announcement - June 26, 1975 in Ivan Allen Company v. United States
Harry A. Blackmun:
The next case, Ivan Allen Co. against the United States comes to us on certiorari from the United States Court of Appeals for the Fifth Circuit.
And it concerns the so-called accumulated earnings tax imposed on most corporations.
This taxpayer, petitioner, the Ivan Allen Company of Atlanta possessed a portfolio of listed and unlisted marketable securities.
These had been purchased out of earnings in prior years and it so happen that throughout the tax years in question here which are fiscal 1965 and 1966.
The market value of these securities had greatly exceeded their cost to the corporation.
During those fiscal years, the taxpayer had undistributed earnings.
And the question is whether in determining -- the question is whether in determining whether those undistributed earnings were improperly accumulated within the meaning of the tax.
The securities in the investment portfolio are to be valued at cost to the corporation or whether their marketable figures could be taken to account.
The Commissioner of Internal Revenue of course took the latter position and the taxpayer obviously took the former.
The statute provides a rebuttable presumption that a corporation that has accumulated earnings beyond the reasonable needs of the business does so, the purpose of avoiding the income tax with respect to its shareholders.
The Internal Revenue Service applied this presumption and asserted deficiencies.
They were paid and the corporation filed claims for refund and on the denial of those claims, this litigation was instituted.
The District Court held that the readily marketable securities were to be taken into account at cost.
Accordingly, it entered judgment for the taxpayer.
The Fifth Circuit reversed.
We granted certiorari because of an apparent conflict with the case in the Fourth Circuit.
In an opinion filed today, we hold that listed and readily marketable securities owned by the corporation and purchased out of its earnings and profits are to be taken into account not at their cost of the corporation but at their net liquidation value for purposes of the impact of the accumulated earnings tax.
This is a narrow opinion focusing primarily on the facts of this case.
But accordingly, the judgment of the Court of Appeals for the Fifth Circuit is affirmed.
I'm authorized to say that Mr. Justice Powell has filed a dissenting opinion and is joined therein by Mr. Justice Douglas and Mr. Justice Stewart.