Schenk v. Commissioner’s Empirical Analysis
1982
Citation profile
8
cited by 8 later decisions
December 1986
most recently cited
4 federal appellate ·
Relationships
Applies 26 U.S.C. § 162
Relies on Burnet v. Sanford & Brooks Co. · Security Flour Mills Co. v. Commissioner · Stice v. United States · Robert J. v. Commissioner
Most-quoted passages
The sentences later courts lift from this opinion, ranked by how many decisions quote each — the parts of the opinion doing the work. These counts are smaller than the citation total above because most of the 8 citing decisions cite the case generally; a passage count includes only decisions quoting that exact language verbatim.
“Taxpayer-appellant LaVerne Schenk (footnote omitted) is a Texas farmer who raises wheat and milo and “runs a few cattle.” For several years, Mr. Schenk has been an officer (footnote omitted) and member of the Dawn Agricultural Cooperative, an organization which sells farm supplies (footnote omitted) and personal consumption items (footnote omitted) to its members. Each year Mr. Schenk buys substantial amounts of fertilizer, farm supplies, and groceries from the Cooperative Throughout the early 1970’s, it was his practice to “prepay” for many of these purchases. Each December, Mr. Schenk would deliver a check to the Cooperative to cover the cost of fertilizer and supplies delivered and consumed during the following year. In accord with his standard practice, Mr. Schenk delivered a $25,000 check to the Cooperative on December 30, 1975. This check bore a notation indicating that $20,000 was to be used for the purchase of approximately 100 tons of fertilizer and $5,000 would be for “general supplies.” Upon receipt of Schenk’s check, the Cooperative credited these “payments” to separate “fertilizer” and “general supply” accounts that it maintained for each of its members. During the following year, Schenk actually took delivery of $20,000 worth of fertilizer which was charged against his “fertilizer” account. He also purchased farm supplies and personal consumption items which were charged against his “general supply” account. Once Schenk had made the $25,000 expenditure, he could”
1 later decision quote this exact passage · from the majority“In the case now before us, the Tax Court held that our opinion in Stice controlled its decision. We agree. Taxpayer-farmer Schenk, like taxpayer-farmer Stice, made large lump-sum prepayments nominally earmarked for fertilizer to be delivered in the year following payment. However, Schenk, like Stice, was never obligated to take delivery of fertilizer. Schenk, like Stice, retained the option to have his fertilizer prepayment applied to the purchase of entirely different products, even groceries or pet food. See supra note 6. Moreover, if his annual purchases of fertilizer, supplies, or groceries failed to exhaust the amounts prepaid, any outstanding balances could be carried forward to cover the cost of purchases made in future years. Thus, although Schenk’s December 30, 1975 payment was ostensibly for the purchase of fertilizer to be delivered in 1976, he actually retained the right to use these funds for the purchase of many other products far into the future. Conceivably, Schenk could even have used the December 30, 1975 expenditure to cover the cost of soft drinks delivered in 2001. (footnote omitted) We recognize that Schenk did indeed take delivery of the fertilizer he had purportedly purchased during the final hours of 1975. Viewed with the benefit of hindsight, his 1975 expenditures might appear to have been prepayment for fertilizer and farm supplies actually delivered during the following year. However, we cannot have a rule of tax accounting in which the deductibili”
1 later decision quote this exact passage · from the majority“19. Thus, an expenditure to cover the cost of fertilizer to be purchased “some day” will not constitute a bona fide prepayment. There must be some chronological fixation. In this case, the Schenks’ “commitment” to purchase fertilizer was so open-ended, it might even have violated the Rule Against Perpetuities if that ancient doctrine were to be applied to fertilizer conveyancing. 20. “All the revenue acts which have been enacted since the adoption of the Sixteenth Amendment have uniformly-assessed the tax on the basis of annual returns showing the net result of all the taxpayer’s transactions during a fixed accounting period.” Burnett v. Sanford & Brooks Co., 282 U.S. 359, 363 , 51 S.Ct. 150, 151 , 75 L.Ed. 383 quoted in Security Flour Mills Co, v. C.I.R., 321 U.S. 281, 286 , 64 S.Ct. 596, 598 , 88 L.Ed. 725 (1944). 21. In previous years, funds nominally earmarked for “fertilizer” purchases had been intermingled with funds used to purchase a wide variety of farm supplies and personal consumption items. See supra note 6. 22. Mr. Schenk has attempted to distinguish the facts of the Stice case from his own situation, pointing out that the taxpayer in Stice used a prepayment to buy farm supplies other than the fertilizer he had ostensibly purchased, while he (Schenk) actually took delivery of the fertilizer he had paid for. Schenk now suggests that a taxpayer should be able to deduct prepaid farm expenses to the extent that the items paid for are actually delivered in the followi”
1 later decision quote this exact passage · from the majority
How this case has been treated — in progress
Whether each later court followed, distinguished, criticized, or overruled this decision. The treatment classification (task #35) runs highest-cited cases first and lights up here as it reaches this one.