Commissioner of Internal Revenue v. Sunnen

Sunnen (defendant) gave his wife patent-license contracts as gifts to shift the resulting royalty income away from himself for tax purposes; the Board of Tax Appeals had earlier ruled that royalties from one such contract (from 1929–1931) weren't taxable to him, and the Tax Court applied that earlier ruling via res judicata to also exempt 1937 royalties on the same 1928 contract. The IRS (plaintiff) argued that intervening changes in the governing case law on gifts between spouses meant the royalties should now be taxable, and the court of appeals had affirmed the Tax Court's application of res judicata.