Hillsboro National Bank v. Commissioner

Hillsboro National Bank (plaintiff) paid its shareholders' state property tax on their bank shares from 1970 to 1973 and deducted those payments on its federal income tax returns; the state repealed the property tax in 1970 but the repeal did not take effect until 1973, and when it finally took effect, the state refunded the escrowed property taxes directly to Hillsboro's shareholders rather than to Hillsboro itself. Hillsboro argued it never recovered any of its 1970-1973 payments and so had no income to report, but the Commissioner (defendant) determined the refunds should have been included in Hillsboro's income; the Tax Court and Seventh Circuit agreed with the Commissioner, and the Supreme Court granted certiorari.