Cook v. Tait

Background

A native United States citizen who was permanently resident and domiciled in the City of Mexico was required to file an income tax return under the Revenue Act of 1921. He paid $298.34 as the first installment of a $1,193.38 assessment, protesting that his income came from real and personal property located in Mexico, and sued to recover that payment.

Reasoning

The central question was whether Congress may tax income received by a U.S. citizen who lives abroad when the income comes from property abroad. The Court, relying on earlier cases discussed in the opinion, rejected the idea that the power to tax depends on where the person or property is located. The Court explained that the national government’s authority to tax is tied to the relationship between the citizen and the United States and that citizenship and the government’s protective benefits support taxing citizens and their property wherever found. The Court therefore held the tax lawful and affirmed the judgment.

Real world impact

The decision makes clear that the federal government can impose income taxes on U.S. citizens living abroad on income from foreign-located property. The opinion also quotes a Treasury regulation saying citizens are liable to the tax wherever resident, and it distinguishes national taxing power from limits that might apply to state governments.