2.Issue: What is it income [1916, 1917, or 1922]?a.TP: wants income to be included in 1916 b/c the 1916 tax rate was really low (was higher in 1917 due to WWI)i.Argues that they had the money to use in 1917, but the litigation as looming and was not resolved until 19223.Held: It is income in 1917 b/c that was when it was paida.There needs to be some finalityb.PROF: TP has the cash to use as it sees fitiii.Lewis 1.Facts: EE got a really big bonus but later found out that he was only entitled to ½ of it, so he was forced to pay a portion backa.1944: EE earned the bonus $b.1946: EE paid it backc.*Dramatic change in rate structures b/w the years
2.Issue: Does EE get a tax deduction when he returns his portion? When is it income?
5.Note: what happens to Lewis’s ER?