American Home Products Corp. v. United States

This case involves the tax effects of certain forward sale contracts of foreign currency. We must first determine the proper amount of dividends declared in British pounds when the American taxpayer immediately applied most of the dividends it received to cover two of its forward sale contracts of pounds into dollars. We conclude that the dividends must be measured by the prevailing exchange rate at the time of distribution to taxpayer, not the better rate contractually mandated by the forward sale agreements. The second issue involves characterization of taxpayer’s gain from the assignment…