Taft v. Bowers
Encyclopedia
Taft v. Bowers, 278 U.S. 470
(1929), was a case heard before the United States Supreme Court
dealing with taxation of a gift of shares of stock under the Sixteenth Amendment to the United States Constitution
. The recipient of shares of stock, Elizabeth Taft, argued that she could not be taxed on the amount that the gift increased in value before she received it. She agreed that the IRS could tax the increase in value of the gift that occurred after her receipt of the gift.
The Supreme Court held that the IRS could tax the appreciation which occurred while the gift was in the hands of the donor, finding that nothing in the Constitution requiring Congress to tax increased capital only so far as the increase occurred while in the hands of the current owner. As Ms. Taft accepted the gift with knowledge of the statute, she voluntarily assumed the position of the donor with respect to the appreciation of the stock. The rationale for the decision is that otherwise the appreciation occurring in the hands of the donor would never be taxed.
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1929), was a case heard before the United States Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
dealing with taxation of a gift of shares of stock under the Sixteenth Amendment to the United States Constitution
Sixteenth Amendment to the United States Constitution
The Sixteenth Amendment to the United States Constitution allows the Congress to levy an income tax without apportioning it among the states or basing it on Census results...
. The recipient of shares of stock, Elizabeth Taft, argued that she could not be taxed on the amount that the gift increased in value before she received it. She agreed that the IRS could tax the increase in value of the gift that occurred after her receipt of the gift.
The Case
Ms. Taft's father purchased 100 shares of stock in 1916 for $1000. In 1923, he gave them to Ms. Taft, when they were valued at $2000. Ms. Taft sold them later that year for $5000. The IRS argued that she should have to pay tax on $4000 - the total amount of appreciation since the stock was first purchased. Ms. Taft argued that she should only pay tax on $3000 - the amount of appreciation gained while she was the owner of the stock. Although the tax code indicated that Congress specifically intended that donees pay tax on all appreciation since the purchase of the property, Ms. Taft argued that the Sixteenth Amendment did not grant Congress to authorize this type of tax.The Supreme Court held that the IRS could tax the appreciation which occurred while the gift was in the hands of the donor, finding that nothing in the Constitution requiring Congress to tax increased capital only so far as the increase occurred while in the hands of the current owner. As Ms. Taft accepted the gift with knowledge of the statute, she voluntarily assumed the position of the donor with respect to the appreciation of the stock. The rationale for the decision is that otherwise the appreciation occurring in the hands of the donor would never be taxed.