COOK V. TAIT

1. COOK V. TAIT CSA 6470 � International Legal Framework Professor Stephen Muffler Presented By: Sheryl Walters-Malcolm

2. Judicial Body The United States Supreme Court

3. FACTS Plaintiff was a United States citizen, legally residing and domiciled in Mexico He earned income from the property he owned he owned in Mexico A demand was made for payment of taxes on the income earned from the property A tax of $1,193.38 was assessed and plaintiff made an initial payment of $298.34 Plaintiff contends that Congress does not have the power to impose tax because income was derived solely from property located outside the jurisdiction of the United States Plaintiff is attempting to recover the initial payment that was made.

4. ISSUE Court had to determine whether Congress has the power to tax income earned (from property located in Mexico) by a US citizen who was a legal resident of and domiciled in Mexico at the time the income was earned.

5. DECISION The Court ruled that Congress has the power to impose the tax on the income earned

6. RATIONALE Court referred to United States v. Bennett (232 U.S. 299) A foreign built yacht was owned, and used outside the United States, by a citizen domiciled in the United States Court ruled that the US has the power to impose a tax on the yacht, in this case, in the form of a tariff. Court also referred to United States v. Goelet (232 U.S. 293) Court had to determine whether to impose taxes on yacht outside the US owned by a US citizen permanently residing and domiciled in a foreign country Ruling was that the yacht was not subject to tax, but was a matter of it being built outside of the US. It was expressly stated that US had power to tax, regardless of where the US citizen was permanently domiciled, and that US tax laws specifically include US citizens living abroad.

7. RATIONALE Additionally the Court contends that the government benefits the citizen and his property Government has the power to make the benefit complete, and if income is earned on property, it cannot depend on the location of that property The income the citizen receives is taxed, and not the property itself

8. RELEVANCY Managers might be required or choose to live abroad and could derive income from several sources in a foreign country. The manager needs to be aware of this case and of the requirement to report income earned on his/her foreign investments and/or salaries.