United States V. Kirby Lumber Co. - Decision

Decision

In a brief, concise, unanimous opinion, Justice Holmes upheld the validity of the Treasury regulations. He distinguished Bowers v. Kerbaugh-Empire Co. on the grounds that the enterprise in that case had been on the whole a failure, and had lost money. In this case, the taxpayer had made a clear and obvious gain. By paying off its debts for less than the issue price, it had freed up assets to spend on other things. Interestingly, Justice Holmes said nothing in his opinion about the Treasury's definition of income. Later cases before the Court did however address directly the Treasury's definition in connection with related cases.