Name_____________________ Case Reviewed CIR v. Glenshaw Glass Co., 348 US 426 (1955) Facts
The Commissioner of the Internal Revenue Service (IRS) obtained certiorari to litigate two independent cases with an identical issue. The issue is one of statutory interpretation of IRC §
22(a). The two defendants, Glenshaw Glass Co. and William Goldman Theatres, Inc. received
$800,000 and $375,000, respectively, as settlements for recovery of gross income and punitive damages. Both the Commissioner and the defendants agreed on the taxability of the recovery amounts, but not the punitive amounts. Specifically, Glenshaw Glass Co. and William Goldman
Theatres, Inc. did not report punitive damage amounts of $324,529.94 and $250,000, respectively, as gross income. Issue
Whether the amounts received as punitive damages must be reported by the taxpayers as gross income under IRC § 22(a). Decision
Punitive damage awards are taxable as gross income. Reasons
1. The Court could not accept taxpayers’ contention that punitive damages are not within the scope of § 22(a), since they are “windfalls” from the culpable conduct of third parties. The general definition of gross income does not provide for any limitations as to the source or nature of the income, “…gains or profits and income derived from any source whatever.” 2. The Court could neither accept the taxpayers’ contention that a narrower reading of § 22(a) as in Eisner v. Macomber
