Berch v. United States

In 1926 plaintiff S. H. Berch sold 11,000 shares of Class B stock of the Western Dairy Products Company. Plaintiffs filed separate individual income tax returns for the calendar year 1926 on a community property basis and the profit on the sale of this stock was returned as ordinary income. However, within two years from the time they paid their taxes they filed claims for refund on the ground that they were taxable on the profit received, not as ordinary *278income, but as a capital net gain at the rate of 12*4 percent. These claims were rejected and plaintiffs brought these suits.

1. The profit…