- 33 -
was not then regarded as serious. That is, we held that the
taxpayers in O’Brien v. Commissioner, supra, and in Cotnam v.
Commissioner, 28 T.C. 947 (1957), revd. on this issue and affd.
on other issues 263 F.2d 119 (5th Cir. 1959), were entitled to
some but not all of the relief they claimed from the general
application of the annual accounting period rules.8
However, as the majority opinion notes (majority op. pp. 13-
15), continued application of the court-made rules, in this era
of minimum tax can raise effective tax rates to hardship levels
8The statute referred to in O’Brien v. Commissioner, 38 T.C.
707, 710 (1962), affd. 319 F.2d 532 (3d Cir. 1963), is sec. 1303,
I.R.C. 1954, which provided a “cap” on taxation of back-pay
awards, calculated by “spreading back” the award over the years
to which the awarded amounts were attributable. We held that the
gross award was to be spread back, unreduced by the taxpayer’s
costs of obtaining the award. We noted that the taxpayer merely
was being denied a special, limited relief from the normal
incidences of income taxation, and that he remained entitled to
deduct his legal fees for the year the award was made. See
O’Brien v. Commissioner, 38 T.C. at 710, 712. In O’Brien v.
Commissioner, 38 T.C. at 711, we relied on Smith v. Commissioner,
17 T.C. 135 (1951), revd. on another issue 203 F.2d 310 (2d Cir.
1953), in which we had ruled the same way under sec. 107(d),
I.R.C. 1939, the predecessor of sec. 1303, I.R.C. 1954. In Smith
v. Commissioner, 17 T.C. at 144, the taxpayer wanted the gross
award spread back and the expenses deducted for the year of the
award, while the Commissioner argued for spreading back the net
cost; we held for the taxpayer. In Cotnam v. Commissioner, 28
T.C. 947, 953-954 (1957), revd. on this issue and affd. on other
issues 263 F.2d 119 (5th Cir. 1959), we also held that the gross
award was to be spread back under sec. 107(d), I.R.C. 1939, and
the expenses deductible for the year of the award.
The spread-back provisions that were the foundations for
Smith, Cotnam, and O’Brien were repealed by the Revenue Act of
1964, Pub. L. 88-272, sec. 232(a), 78 Stat. 19, 105, effective
for taxable years beginning after Dec. 31, 1963. See Pub. L. 88-
272, sec. 232(g)(1), 78 Stat. 112.
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