Law School Case Brief
Cesarini v. United States - 296 F. Supp. 3 (N.D. Ohio 1969)
Gross income means all income from whatever source derived, unless excluded by law. Under Treas. Reg. § 1.61-1(a), gross income includes income realized in any form, whether in money, property, or services.
Plaintiffs Ermenegildo Cesarini and his wife purchased a used piano at an auction sale for approximately $15.00. In 1964, while cleaning the piano, the couple discovered the sum of $4,467 in old currency; they decided thereafter to keep the piano instead of discarding it, as previously planned. The couple exchanged the old currency for new at a bank and reported the sum of $4,467 on their 1964 joint income tax return as ordinary income from other sources. However, the couple sought a refund, which was denied by the Commissioner of Internal Revenue. The couple filed an action in federal district court for the recovery of income tax payments made plus interest on the money they found inside the piano; in the alternative, the couple sought to have the found money treated as capital gains.
Was the couple entitled to a refund or capital gains treatment?
The district court has concluded that the couple was not entitled to a refund of the amount requested, nor were they entitled to capital gains treatment on the money found in the piano. The court found that the couple was unable to point to any inconsistency between the gross income sections of the Internal Revenue Code, the interpretation of them by the regulations and the courts, and the revenue ruling they attacked as inapplicable. On the other hand, the Government showed a consistency in letter and spirit between the ruling and the code, regulations, and court decisions. Since the statutes and rules clearly included treasure trove in calculations of gross income, the couple was not entitled to a refund. Moreover, because the couple did not sell or exchange either the piano or the money, no capital gains could be realized on either the money or the piano.
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