US Supreme Court issues new tax opinion

Today, the Supreme Court issued a unanimous opinion (8-0; Justice Kagan did not participate) in United States v. Quality Stores, Inc. holding that severance payments to involuntarily-terminated employees because of the end of the business in bankruptcy constitutes taxable wages for the purpose of FICA taxes under 26 USC sec. 3101. Justice Kennedy wrote the opinion, which reversed the decision of the Sixth Circuit.

The case is somewhat notable for its procedural history, as it is a tax case that was litigated originally as an adversary proceeding in bankruptcy court, rather than as a more typical deficiency case in Tax Court or a refund suit in district court or the Court of Federal Claims.


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