Burnet v. Sanford & Brooks Co.
United States Supreme Court
282 U.S. 359 (1931)
Sanford & Brooks Company (S&B) (plaintiff) performed government contract work from 1913 to 1916, reporting net losses in 1913, 1915, and 1916 due to inadequate government compensation; S&B sued and was reimbursed for those losses in 1920, but did not report the reimbursement as income since it merely offset earlier losses, leaving S&B with no net profit on the overall multiyear transaction. The Commissioner (defendant) assessed back taxes on the 1920 reimbursement as gross income; the Board of Tax Appeals agreed with the Commissioner, but the Fourth Circuit reversed, treating the reimbursement as a mere return of prior losses rather than income.
Whether a federal taxpayer's income must be assessed annually, even when it is derived from a multiyear transaction from which the taxpayer ultimately makes no profit.