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U.S. Supreme Court

Commissioner v. Wodehouse, 337 U.S. 369 (1949)

Commissioner v. Wodehouse

No. 84

Argued December 10, 13, 1948

Decided June 13, 1949

337 U.S. 369


Respondent, a nonresident alien not engaged in trade or business within the United States and not having an office or place of business therein, received in 1938 and 1941 from magazine and book publishers in the United States lump sum payments, in advance and in full, for the American serial and book rights to certain literary works of which he was the author and which were ready to be copyrighted.


1. Under the Revenue Act of 1938 and the Internal Revenue Code as amended, the sums so received were includible in "gross income from sources within the United States," as "rentals or royalties for the use of or for the privilege of using in the United States . . . copyrights . . . and other like property," and were thus taxable to respondent. Pp. 336 U. S. 371-374, 336 U. S. 377-392.

(a) Had the sums here involved been received in the taxable year 1934, they unquestionably would have been taxable to respondent under the Revenue Act of 1934, and they were not relieved from taxation by the amendments which were made by the Revenue Act of 1936 and which were still in effect in 1938 and 1941. Pp. 336 U. S. 380-392.

(b) The Revenue Act of 1936 preserved the taxability of the several kinds of income of nonresident alien individuals which had been the subject of withholding at their respective sources, including receipts in the nature of royalties for the use of copyrights in the United States. Pp. 336 U. S. 386-392.

(c) To have exempted nonresident aliens from these readily collectible taxes derived from sources within the United States would have discriminated in their favor against resident citizens of the United States who would be required to pay their regular income tax on such income, if treated as royalties within the meaning of the gross income provisions, or at least to pay a tax upon them as capital gains, if treated as income from sales of capital within the meaning of the capital gains provisions. No such purpose to discriminate can be implied. P. 336 U. S. 391.

Page 337 U. S. 370

(d) None of the provisions of the 1936 Act here involved were changed by the 1938 Act or the Internal Revenue Code, except as to the rates of tax, and the principal changes even in the rates were to provide higher taxes in the higher brackets, rather than to reduce the taxes on nonresident aliens. P. 336 U. S. 392.

2. The fact that the amounts received for the use of or for the privilege of using the copyrights were lump sum payments, in advance and in full did not exempt such income from taxation. P. 336 U. S. 393-395.

(a) Once it has been determined that the receipts of the respondent would have been required to be included in his gross income for federal income tax purposes if they had been received in annual payments or from time to time during the life of the respective copyrights, it is clear that the receipt of those same sums by him in single lump sums as payments in full, in advance, for the same rights to be enjoyed throughout the entire life of the respective copyrights cannot, solely by reason of the consolidation of the payment into one sum, render it tax exempt. P. 336 U. S. 393.

(b) The words "annual" and "periodical" in §§ 211(a) and 143(b) of the Revenue Act of 1938 and of the Internal Revenue Code, when taken in their context, and in the light of the legislative history of the Act and Code, and the interpretation of them by the Treasury Department and the lower courts, do not require a different result from that here reached. Pp. 336 U. S. 393-394.

166 F.2d 986, reversed.

The Commissioner's determination of deficiencies in a taxpayer's income tax for 1938 and 1941 was sustained by the Tax Court. 8 T.C. 637. The Court of Appeals reversed. 166 F.2d 986. This Court granted certiorari. 335 U.S. 807. Reversed and remanded, p. 395.

Page 337 U. S. 371

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