United States v. Sullivan
274 U.S. 259, 47 S. Ct. 607, 1927 U.S. LEXIS 25 (1927)
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Rule of Law:
Income derived from illegal activities is subject to federal income tax, and the Fifth Amendment privilege against self-incrimination does not permit a taxpayer to refuse to file any return whatsoever, but rather requires the privilege to be claimed on specific incriminating items within the return.
Facts:
- The defendant, Sullivan, had sufficient gross income to require a tax return under the Revenue Act of 1921.
- A large part of Sullivan's income was derived from business conducted in violation of the National Prohibition Act (illicit liquor traffic).
- Sullivan wilfully refused to make a return of his net income as required by the Revenue Act of 1921.
Procedural Posture:
- Sullivan was convicted by a trial court for wilfully refusing to make a return of his net income as required by the Revenue Act of 1921.
- The Circuit Court of Appeals reversed the judgment of conviction, holding that while gains from illicit traffic were taxable, the Fifth Amendment protected the defendant from the requirement of a return.
- The Supreme Court of the United States granted a writ of certiorari to review the Circuit Court of Appeals' decision.
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Issue:
Does the Fifth Amendment privilege against self-incrimination permit an individual to refuse to file an income tax return solely because the income was derived from illegal activities?
Opinions:
Majority - Justice Holmes
No, the Fifth Amendment privilege against self-incrimination does not permit an individual to refuse to file an income tax return for income derived from illegal activities. The Court held that gains from illicit traffic in liquor are subject to income tax under Section 213(a) of the Revenue Act of 1921, which broadly defines gross income to include 'gains, profits, and income derived from...the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever.' The Court emphasized that Congress intentionally omitted the word 'lawful' from the definition of business, indicating intent to tax all income. While the Fifth Amendment protects individuals from self-incrimination, it does not authorize a blanket refusal to file a return. If specific questions on the return would elicit incriminating answers, the taxpayer could claim the privilege as to those particular questions, but not refuse to make any return at all, especially since most items on a return would not be incriminating. Refusal to file any return goes beyond the scope of the privilege, which must be raised for specific, objectionable parts. The Court cited precedents like Mason v. United States and United States ex rel. Vajtauer v. Commissioner of Immigration to support the principle that the privilege must be specifically claimed rather than used as an excuse for total non-compliance.
Analysis:
This case is a landmark decision that solidified the principle that all income, regardless of its source or legality, is subject to federal taxation. It significantly clarified the scope and application of the Fifth Amendment privilege against self-incrimination in the context of tax obligations, establishing that the privilege must be invoked specifically for incriminating questions rather than serving as a blanket excuse for refusing to file any return. This precedent ensures that individuals engaged in illegal activities cannot escape their civic duty to report and pay taxes on their earnings, thereby bolstering the government's tax collection capabilities and preventing tax evasion based on the nature of the income source. It underscores the notion that the privilege is a shield against testimonial compulsion, not an all-encompassing cloak of immunity from generally applicable legal requirements.
