''Knetsch v. United States'', 364 U.S. 361 (1960), was a decision by the

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

concerning

taxation law Tax law or revenue law is an area of legal study in which public or sanctioned authorities, such as federal, state and municipal governments (as in the case of the US) use a body of rules and procedures (laws) to assess and collect taxes in a ...

. The taxpayer was a saver who was convinced to buy a deferred annuity because the inside buildup on such policies is tax-deferred. However, he wanted to claim a deduction on the money he borrowed that he used to buy the annuity. The IRS won and the taxpayer was denied the deduction. An understanding of the economics would immediately reveal that the only reason the transaction had any chance of making sense for the taxpayer was the asymmetric way the-then current tax code allowed a current deduction on the loan liability at the same time allowed

tax deferral Tax deferral refers to instances where a taxpayer can delay paying taxes to some future period. In theory, the net taxes paid should be the same. Taxes can sometimes be deferred indefinitely, or may be taxed at a lower rate in the future, particular ...

on the purchased asset. Success would have legitimated tax arbitrage.

External links

* United States Supreme Court cases United States Supreme Court cases of the Warren Court United States taxation and revenue case law 1960 in United States case law {{Tax-stub

See also

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External links