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The Supreme Court Addresses Taxes

For the first time in 73 years, the United States Supreme Court affirmed the right of taxpayers to minimize taxes. In a unanimous ruling, the Court quoted from a 1935 decision: "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted." Gregory v. Helvering, 293 U.S. 465 (1935).

But the Court cautioned: "The rule is a two-way street: While a taxpayer is free to organize his affairs as he chooses, nevertheless, once having done so, he must accept the tax consequences of his choice, whether contemplated or not … and may not enjoy the benefit of some other route he might have chosen to follow but did not …. The question here, of course, is not whether alternative routes may have offered better or worse tax consequences [but] whether what was done … was the thing ...

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  • July 1, 2008