October Term 2007 · Docket 06-1509
Does a shareholder receive a tax-free return of capital when taking money from a corporation without stock ownership?
The dispute centers on whether a shareholder can claim a tax-free return of capital for funds taken from a corporation while acting in a non-shareholder capacity.
Verified source milestones
- — An official oral-argument transcript was verified.
- — An official oral-argument transcript was verified.
The arguments, in order
This case may have been argued more than once. Each entry below uses that session's official transcript. Later arguments do not erase earlier ones.
Argument 1 ·
What happened at the argument
Mr. Cline argued the tax code excludes non-shareholder payments from capital return rules.
Ms. Maynard argued the taxpayer must prove specific factual elements for the defense.
justice_souter_asked_about_the_significance_of_the_phrase_with_respect_to_the_stock.
justice_kennedy_asked_if_the_corporation_balance_sheet_exists_in_the_record.
Read the official transcript for this argument · Official argument details
Sources used for this argument breakdown
- Official Supreme Court Transcript — file page 10, lines 33-35 — Transcript, file page 10, lines 33-35
- Official Supreme Court Transcript — file page 10, lines 39-43 — Transcript, file page 10, lines 39-43
- Official Supreme Court Transcript — file page 11, lines 13-27 — Transcript, file page 11, lines 13-27
- Official Supreme Court Transcript — file page 11, lines 39-41 — Transcript, file page 11, lines 39-41
- Official Supreme Court Transcript — file page 12, lines 15-39 — Transcript, file page 12, lines 15-39
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 3, lines 31-31 — Transcript, file page 3, lines 31-31
- Official Supreme Court Transcript — file page 3, lines 7-15 — Transcript, file page 3, lines 7-15
- Official Supreme Court Transcript — file page 5, lines 11-31 — Transcript, file page 5, lines 11-31
- Official Supreme Court Transcript — file page 5, lines 51-7 — Transcript, file page 5, lines 51-7
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
- Official Supreme Court Transcript — file page 58, lines 21-21 — Transcript, file page 58, lines 21-21
- Official Supreme Court Transcript — file page 58, lines 33-39 — Transcript, file page 58, lines 33-39
- Official Supreme Court Transcript — file page 59, lines 7-9 — Transcript, file page 59, lines 7-9
- Official Supreme Court Transcript — file page 7, lines 5-17 — Transcript, file page 7, lines 5-17
- Official Supreme Court Transcript — file page 8, lines 33-5 — Transcript, file page 8, lines 33-5
- Official Supreme Court Transcript — file page 9, lines 35-39 — Transcript, file page 9, lines 35-39
- Official Supreme Court Transcript — file page 9, lines 43-15 — Transcript, file page 9, lines 43-15
A citizen's guide to the whole case
What this case is about
This case examines the tax treatment of corporate distributions. The core issue is whether a shareholder can claim a tax-free return of capital for funds taken from a corporation while acting in a non-shareholder capacity.
Official sources for this section
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
How the case got here
The Supreme Court heard oral argument in this case on January 8, 2008.
Official sources for this section
- Official Supreme Court Transcript — file page 3, lines 7-15 — Transcript, file page 3, lines 7-15
- Official Supreme Court Transcript — file page 59, lines 7-9 — Transcript, file page 59, lines 7-9
What each side wants
The taxpayer wants the court to accept the return of capital defense.
The government wants the court to reject the return of capital defense.
Official sources for this section
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
What each side says
The taxpayer argues the tax code excludes non-shareholder payments from capital return rules.
The government argues the taxpayer must prove specific factual elements for the defense.
Official sources for this section
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
What the justices asked
Justice Souter asked about the significance of the phrase with respect to the stock.
Justice Kennedy asked if the corporation’s balance sheet exists in the record.
Official sources for this section
- Official Supreme Court Transcript — file page 10, lines 33-35 — Transcript, file page 10, lines 33-35
- Official Supreme Court Transcript — file page 10, lines 39-43 — Transcript, file page 10, lines 39-43
- Official Supreme Court Transcript — file page 11, lines 13-27 — Transcript, file page 11, lines 13-27
- Official Supreme Court Transcript — file page 11, lines 39-41 — Transcript, file page 11, lines 39-41
- Official Supreme Court Transcript — file page 12, lines 15-39 — Transcript, file page 12, lines 15-39
- Official Supreme Court Transcript — file page 3, lines 31-31 — Transcript, file page 3, lines 31-31
- Official Supreme Court Transcript — file page 5, lines 11-31 — Transcript, file page 5, lines 11-31
- Official Supreme Court Transcript — file page 5, lines 51-7 — Transcript, file page 5, lines 51-7
- Official Supreme Court Transcript — file page 58, lines 21-21 — Transcript, file page 58, lines 21-21
- Official Supreme Court Transcript — file page 58, lines 33-39 — Transcript, file page 58, lines 33-39
- Official Supreme Court Transcript — file page 59, lines 7-9 — Transcript, file page 59, lines 7-9
- Official Supreme Court Transcript — file page 7, lines 5-17 — Transcript, file page 7, lines 5-17
- Official Supreme Court Transcript — file page 8, lines 33-5 — Transcript, file page 8, lines 33-5
- Official Supreme Court Transcript — file page 9, lines 35-39 — Transcript, file page 9, lines 35-39
- Official Supreme Court Transcript — file page 9, lines 43-15 — Transcript, file page 9, lines 43-15
Why it matters
This case defines the boundary between shareholder and non-shareholder financial actions. It determines how taxpayers calculate their tax liability on corporate distributions. It clarifies the legal standard for claiming a return of capital.
Official sources for this section
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
What happens next
This article currently covers the argument record. Use the official docket link for later case activity.
Official sources for this section
- Official Supreme Court Transcript — file page 10, lines 33-35 — Transcript, file page 10, lines 33-35
- Official Supreme Court Transcript — file page 10, lines 39-43 — Transcript, file page 10, lines 39-43
- Official Supreme Court Transcript — file page 11, lines 13-27 — Transcript, file page 11, lines 13-27
- Official Supreme Court Transcript — file page 11, lines 39-41 — Transcript, file page 11, lines 39-41
- Official Supreme Court Transcript — file page 12, lines 15-39 — Transcript, file page 12, lines 15-39
- Official Supreme Court Transcript — file page 3, lines 31-31 — Transcript, file page 3, lines 31-31
- Official Supreme Court Transcript — file page 3, lines 7-15 — Transcript, file page 3, lines 7-15
- Official Supreme Court Transcript — file page 5, lines 11-31 — Transcript, file page 5, lines 11-31
- Official Supreme Court Transcript — file page 5, lines 51-7 — Transcript, file page 5, lines 51-7
- Official Supreme Court Transcript — file page 58, lines 21-21 — Transcript, file page 58, lines 21-21
- Official Supreme Court Transcript — file page 58, lines 33-39 — Transcript, file page 58, lines 33-39
- Official Supreme Court Transcript — file page 59, lines 7-9 — Transcript, file page 59, lines 7-9
- Official Supreme Court Transcript — file page 7, lines 5-17 — Transcript, file page 7, lines 5-17
- Official Supreme Court Transcript — file page 8, lines 33-5 — Transcript, file page 8, lines 33-5
- Official Supreme Court Transcript — file page 9, lines 35-39 — Transcript, file page 9, lines 35-39
- Official Supreme Court Transcript — file page 9, lines 43-15 — Transcript, file page 9, lines 43-15
Official Court provenance
Official docket and case history · Official Supreme Court oral-argument detail page
Title and summary sources
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
- Official Supreme Court Transcript — file page 20, lines 45-19 — Transcript, file page 20, lines 45-19
- Official Supreme Court Transcript — file page 3, lines 17-29 — Transcript, file page 3, lines 17-29
- Official Supreme Court Transcript — file page 58, lines 15-19 — Transcript, file page 58, lines 15-19
Revision history
- Revision 1 · Official Transcript ·
Correction: Rewritten to the concise citizen-facing editorial standard.
- Revision 2 · Official Transcript ·
Correction: Migrated to the dated official Court activity contract without model use.