Staff Reports
The U.S. Supreme Court is on the verge of making a major decision that could have far-reaching implications for American taxpayers. The court is mulling over whether to take on a case challenging the legality of a federal tax that has stirred up quite the legal storm.
SCOTUS reviews Washington couples’ income tax suit some say could nullify tax code https://t.co/TfeqDpT4LU
— Bo Snerdley (@BoSnerdley) December 6, 2023
This lawsuit, brought forward by a feisty Washington couple, is shaking things up as they argue against owing a hefty $15,000 tax under a one-time income tax from 2017. This tax applies to the earnings of U.S. residents who made some moolah from shares in foreign companies.
The big fuss is over whether income needs to be “gained” or “realized” in order to be taxed. The plaintiffs built their case around the idea that they didn’t actually pocket any cash from their stock investment but reinvested the capital gains back into the company.
The heart of the matter lies in the 16th Amendment, which gives Congress the green light to tax incomes from any source without the need to divvy it up among the states. The plaintiffs contend that for income to be taxable, it needs to be “realized.” They even drop a history bomb, citing the 1920 case Eisner v. Macomber, in which the Supreme Court ruled that stock dividends couldn’t be taxed if the shareholder didn’t pocket any dough from it.
In the recent oral argument before the SCOTUS, the plaintiffs’ legal eagle made a compelling case, emphasizing that the petitioners didn’t cash in on their stock investment. According to him, the tax essentially targets property ownership, which requires it to be divvied up among the states.
The SCOTUS justices grilled both sides on their definition of income for tax purposes. The federal government’s legal team argued that Congress has the power to tax unrealized income, and they’ve done so before. But wait, some argued that the tax could make chunks of the Internal Revenue Code null and void.
The U.S. Chamber of Commerce dished out a cautionary note, warning that a decision favoring the tax could result in businesses and shareholders being slapped with taxes on anything that the government later deems “income.” Yikes! It could mean that companies lose control over their own financial decisions.
So, it’s game on at the Supreme Court as the justices gear up to drop the hammer on this tax showdown. This decision could be the bombshell that shakes up the tax world. Stay tuned, taxpayers!
