R. J. Reynolds Tobacco Co. v. United States

This action is brought to recover income and excess profits taxes allegedly improperly assessed against plaintiff for the years 1940 to 1948, inclusive, in the amount of $8,352,851.83, plus interest.1

The issue in the case is whether certain payments made by the plaintiff to its employees pursuant to a company bylaw passed in 1912 and paid proportionate to the employees’ stockholdings in the company constitute compensation and are, therefore, deductible in arriving at taxable income. If the payments are considered compensation, they are deductible to the extent reasonable pursuant to section…