46th Annual Society for Case Research & Global Jesuit Case Series Summer Workshop 2024

Experience level: 
Beginner
Intended Audience: 
Faculty
Authors: 
Bonnie Brown and Andy Borchers

What is Income: The U.S. Taxation of Unrealized Income in the Moore vs United States Case

Charles and Kathleen Moore were a retired couple living in Washington state in 2023. After the passage of a major 2017 Federal tax law, they received a bill from the IRS for $14,729 on gains on an investment in India. The 2017 law included a one-time mandatory repatriation tax on undistributed profits earned between 1986 and 2017. This seemingly minor tax issue had major implications on the Federal government’s ability to collect an estimated $340 billion in taxes over 10 years. Unlike ordinary income where citizens pay taxes annually based on their earnings, investments are normally not taxed until investors cash out their investment. In this case the Moore’s never received the gains. Rather, they reinvested the funds in the Indian farm equipment firm KisanKraft. Since these gains were never realized, how could they be taxed on them?