Louis Brandeis

Name: Brown v. Helvering — Opinion of the Court
Author: Louis Brandeis

Brown v. Helvering — Opinion of the Court

Summary

“Brown v. Helvering — Opinion of the Court”, is a work by Louis Brandeis. It explores elements such as income, cancellation and deductions.

Quotes from Brown v. Helvering — Opinion of the Court (Louis Brandeis)

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ Brown urges that the overriding commission is compensation for services rendered throughout the life of the policy; that the compensation to be rendered in later years cannot be considered as earned until the required services have been performed; and that the Revenue Acts contemplate that, where books are kept on the accrual basis, the income shall be accounted for as it is earned. He suggests, therefore, as an alternative method of ascertaining the income, that the commissions on each year's writing be prorated over the life of the policies. ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ Brown argues that, since insurance companies are allowed to deduct reserves for unearned premiums which may have to be refunded, he should be allowed to make the deductions claimed as being similar in character. The simple answer is that the general agent is not an insurance company; and that the deductions allowed for additions to the reserves of insurance companies are technical in character and are specifically provided for in the Revenue Acts. These technical reserves are required to be made by the insurance laws of the several states. ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ Thus, whenever there is a cancellation and a return or credit of a portion of the premium and of the cost of any reinsurance, the general agent returns to the company or charges itself with a corresponding portion of the overriding commission.
Prior to 1923, overriding commissions on new business were accounted income of the year in which the business was written; and refunds of overriding commission on account of cancellations were accounted expenses of the year of cancellation. The books of the general agent have at all times been kept on the accrual basis. ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ Fire insurance policies are written for periods of one, three, or five years, with the right of cancellation by either party at stipulated rates of premium return. Premiums being payable in advance (subject to the 60-day grace period) , a return premium is paid to the policyholder in case of cancellation; and the general agent, who receives the premium, pays the return premium. The company writing a policy frequently reinsures in another company a part of its contingent liability ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ The refunds during the tax year of those portions of the overriding commissions which represented cancellations during the tax year had, prior to the tax return for 1923, always been claimed as deductions; and they were apparently allowed as 'necessary expenses paid or incurred during the taxable year.' The right to such deductions is not now questioned. Those which the taxpayer claims now are of a very different character. They are obviously not 'expenses paid during the taxable year.' They are bookkeeping changes representing credits to a reserve account. ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ The general agent makes to each principal remittances on monthly balances, crediting itself, among other things, with the overriding commissions on premiums receivable, with the return premiums paid and with the net amount paid for reinsurance ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ United States v. Boston Insurance Co., 269 U.S. 197, 46 S.Ct. 97, 70 L.Ed. 232; New York Life Insurance Co. v. Edwards, 271 U.S. 109, 46 S.Ct. 436, 70 L.Ed. 859. The 'Return Commission' reserve here in question was voluntarily established. Only a few reserves voluntarily established as a matter of conservative accounting are authorized by the Revenue Acts. Section 214 mentions only the reserve for bad debts (in the discretion of the Commissioner) , provided for in paragraph 7 ”

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Source: Wikisource

Louis Brandeis, Brown v. Helvering — Opinion of the Court

“ American Code Co., 280 U.S. 445, 450, 452, 50 S.Ct. 202, 74 L.Ed. 538; compare New York Life Ins. Co. v. Edwards, 271 U.S. 109, 116, 46 S.Ct. 436, 70 L.Ed. 859; Ewing Thomas Converting Co. v. McCaughn (C.C.A.) 43 F. (2d) 503; Highland Milk Condensing Co. v. Phillips (C.C.A.) 34 F. (2d) 777. ”

Louis Brandeis

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