Whipple v. Commissioner

RESPONDENT: Commissioner
LOCATION: Clauson's Inn

DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 373 US 193 (1963)
ARGUED: Mar 26, 1963 / Mar 27, 1963
DECIDED: May 13, 1963

Facts of the case


Media for Whipple v. Commissioner

Audio Transcription for Oral Argument - March 27, 1963 in Whipple v. Commissioner

Audio Transcription for Oral Argument - March 26, 1963 in Whipple v. Commissioner

Earl Warren:

Number 305, A.J. Whipple, et al., Petitioners, versus Archibald -- versus Commissioner of Internal Revenue.i

Solicitor General.

Wrong one.

Earl Warren:


Mr. Dillingham.

Charles Dillingham:

Mr. Chief Justice, Associate Justices, may it please the Court.

This proceeding originated where an income tax deficiency for the years 1952 and 1953, the issues by the time they reached the Tax Court, had narrowed to three.

First, involving a deduction for a payment made by the petitioner to one DM Dossier which was decided favorably for the taxpayer, the Government has not appealed that.

The second involved some statutory penalties in which partially decided in favor of the petitioner and partially for the Government.

Neither side has appealed that.

The issue before this Court coming by certiorari from the Fifth Circuit has split decision.

Judge Hutcheson dissenting and the sole issue in this case is whether the $56,975.10 bad debt owed by Mission Orange Bottling Company Inc. to petitioner was a business bad debt or a non-business bad debt within Section 23 (k) (1) and 23 (k) (4) of the Internal Revenue Act of 1939.

It was stipulated in the Tax Court by the Commissioner, one, that this was a debt; and two, that it became worthless in 1953, the tax here in question.

The only and the real issue in this case as responded admits in his brief is whether the extensive, varied, regular and continuous activities of the petitioner over a long period of years were business activities or were investment activity.

Some idea of how extensive these activities were or how varied they were can be gathered from a quick glance at the many items on his 1952 income tax on page 20 of the record.

How extensive they were can be determined from how many -- from the substantial sums amounting to over $150,000 in ordinary income which these activities generated in the years 1952 out of which the bad debt in question arose in the form of $62,800 in salaries from six corporations in the form of $27,500 in rent from three separate building, in the form of over $4,000 in interest from 17 different parties and $56,000 from partnership income.

These came from enterprises of which the petitioner was the architect.

He created these himself.

These came from business not investment activity.

1941 to 1953, the petitioner organized some 22 corporations, 10 partnerships and a number of joint ventures.

Some idea of the way the petitioner operated can be seen from the account of high form and promoted the tile distributorship with a man named Lisby on page 88 and 89 of the record.

He also entered into the restaurant business.

He promoted oil deals in West Texas and in Lee -- in Lee County and Washington County.

He went out and suddenly bought some property from Fairway Department Stores when they were under the gun to out of five-day deadline to begin construction for which he was paid a fee and paid ordinary income on.

John M. Harlan II:

How would you define the business activity that you claim?

Charles Dillingham:

Mr. Justice Harlan, it's very difficult to define a petitioner's business activities and I think that was the -- one of the troubles of the decision of the Tax Court.

They were trying to fit it into a particular category to try to give it a label, a label and I think it's always dangerous instead of analyzing the things to give the label.

John M. Harlan II:

The trouble that --

Charles Dillingham:

He was, he was --

John M. Harlan II:

The trouble that is that the statute requires that he'd be given a label or the statute has given it a label.