Brief Fact Summary. Wood was president of the American Woolen Company.

The
company adopted a resolution wherein they would pay the tax obligations of Wood
and other officers.

Synopsis of Rule of Law. The discharge of a taxpayers obligation by a third party

is equivalent to direct receipt by the taxpayer.

Facts. William Wood was president of the American Woolen Company for the years
1918 through 1920. The company instated a policy for 1919 and 1920 wherein the
company would pay the taxes of the president and other company officers. The
company paid $681,169.88 for 1918 and $351,179.27 for 1919 on behalf of Wood.
The Board of Tax Appeals held that these amounts paid were income of Wood.

Issue. Were the taxes paid by the company additional income of Wood?

Held. Chief Justice Taft issued the opinion for the Supreme Court of the United
States affirming the lower court and holding that the taxes paid were income to
Wood.

Concurrence. A separate opinion of Justice McReynolds is omitted from the text.

Discussion. The Supreme Court notes that Wood and other employees received a
direct benefit when their tax obligation was discharged by the company. Wood
received a benefit in exchange for his services to the company. This was clearly a
taxable gain.