Portal:Supreme Court of the United States

“ An examination of the entire legislative background of the undistributed profits tax demonstrates, contrary to taxpayers' contentions, that Congress intended the tax to be imposed primarily upon income not distributed in the form of dividends, rather than only upon corporate income which was not distributed at all and accordingly meant to limit severely credits for a corporation's payment of debts and precisely to define the area in which taxpayers were to be entitled to the credit. ”

“ The contracts clearly contain no provision requiring the payment of earnings 'within the taxable year in discharge of a debt'. Nor do they, contrary to taxpayers' assertion, require the irrevocable setting aside of earnings 'within the taxable year for the discharge of a debt' within the meaning of § 26 (c) (2) . The contracts are wholly silent in respect of any setting aside; they do not in terms require taxpayers to set aside the amount due, nor do they direct any segregation or physical retention whatsoever. ”

“ The legislative history of the 1936 Act reveals that Congress was conversant with the problem of computing earnings before the end of the taxable year, in connection with dividend payments, but declined to act. [8] Corporations with oral contracts, or written contracts executed after May 1, 1936, dealing with the disposition of profits in satisfaction of debts also probably think § 26 (c) (2) is a most unreasonable statute. But arguments urging the broadening of a tax deduction statute beyond its plain meaning to avoid harsh results are more properly addressed to Congress than to the courts. ”