author: Justice Thomas

text:
    HOLYWELL CORP. et al. v. SMITH et al.
    No. 90-1361.
    Argued December 4, 1991
    Decided February 25, 1992

      Thomas, J., delivered the opinion for a unanimous Court.

      Kent L. Jones argued the cause for the United States in No. 90-1484 and petitioners in No. 90-1361. With him on the briefs for the United States were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Wallace, Gary D. Gray, and Francis M. Allegra.

      Dennis G. Lyons, Stuart E. Seigel, and Kent A. Yalowitz filed briefs for petitioners in No. 90-1361.

      Herbert Stettin argued the cause for respondents in both cases. With him on the brief for respondent Smith were Louis R. Cohen, F. David Lake, Jr., and John Aramburu. Vance E. Salter, Thomas F. Noone, Edward P. Zujkowski, Mortimer M. Caplin, Walter B. Slocombe, Albert G. Lauber, Jr., Julia L. Porter, and James E. Salles filed a brief for respondent Bank of New York. Barbara E. Vicevich filed a brief for respondent Shutts & Bowen.

      Together with No. 90-1484, United States v. Smith et al., also on certio-rari to the same court.

      A brief of amici curiae was filed for the State of California et al. by Mary Sue Terry, Attorney General of Virginia, H. Lane Kneedler, Chief Deputy Attorney General, K. Marshall Cook, Deputy Attorney General, Barbara M. Rose, Senior Assistant Attorney General, and Martha B. Bris-sette and John Patrick Griffin, Assistant Attorneys General, Daniel E. Lungren, Attorney General of California, Richard Blumenthal, Attorney General of Connecticut, Charles M. Oberly III, Attorney General of Delaware, John Payton, Corporation Counsel of the District of Columbia, Robert A Butterworth, Attorney General of Florida, Michael J. Bowers, Attorney General of Georgia, Warren Price III, Attorney General of Hawaii, Roland W. Burris, Attorney General of Illinois, Linley E. Pearson, Attorney General of Indiana, Bonnie J. Campbell, Attorney General of Iowa, Robert T. Stephan, Attorney General of Kansas, William J. Guste, Jr., Attorney General of Louisiana, Michael E. Carpenter, Attorney General of Maine, J. Joseph Curran, Jr., Attorney General of Maryland, Scott Harshbarger, Attorney General of Massachusetts, Frank J. Kelley, Attorney General of Michigan, Hubert H. Humphrey III, Attorney General of Minnesota, Michael C. Moore, Attorney General of Mississippi, William L. Webster, Attorney General of Missouri, Marc Racicot, Attorney General of Montana, Robert J Del Tufo, Attorney General of New Jersey, Tom Udall, Attorney General of New Mexico, Robert Abrams, Attorney General of New York, Nicholas J. Spaeth, Attorney General of North Dakota, Dave Frohnmayer, Attorney General of Oregon, Ernest D. Preate, Jr., Attorney General of Pennsylvania, James E. O’Neil, Attorney General of Rhode Island, T. Travis Medlock, Attorney General of South Carolina, Charles W. Burson, Attorney General of Tennessee, Dan Morales, Attorney General of Texas, R. Paul Van Dam, Attorney General of Utah, Mario J. Palumbo, Attorney General of West Virginia, and Victor A Kovner, Corporation Counsel of the City of New York.

   Justice Thomas

delivered the opinion of the Court.

These cases require us to decide whether a trustee appointed to liquidate and distribute property as part of a Chapter 11 bankruptcy plan must file income tax returns and pay income tax under the Internal Revenue Code.

HH

Miami Center Limited Partnership borrowed money from the Bank of New York (Bank) to develop “Miami Center,” a hotel and office building complex in Miami, Florida. In August 1984, after it defaulted on the loan, MCLP and four affiliated debtors — Holywell Corporation, Chopin Associates, Miami Center Corporation, and Theodore B. Gould — each filed Chapter 11 bankruptcy petitions. The Bankruptcy Court consolidated the five cases.

Prior to confirmation of a Chapter 11 plan, the debtors represented their own bankruptcy estates as debtors in possession. See 11 U. S. C. § 1101(1). The estates of Gould and Holywell contained two principal assets: equity in Miami Center and cash proceeds from the postbankruptcy sale of certain real estate in Washington, D. C., known as the Washington Properties.

In August 1985, the Bank and other creditors approved a “Consolidated Plan of Reorganization.” The plan required the debtors to give up their interests in Miami Center and the proceeds from the sale of the Washington Properties, but otherwise permitted them to remain in business. Part V of the plan provided:,

“1. A Trust is hereby declared and established on behalf of the Debtors ... and an individual to be appointed by the Court... is designated as Trustee of all property of the estates of the Debtors . . . , including but not limited to, Miami Center [and] the Washington Proceeds ... , to hold, liquidate, and distribute such Trust Property according to the terms of this Plan. The Trust shall be known as the ‘Miami Center Liquidating Trust.'
“2. . . . [A]ll right, title and interest of the Debtors in and to the Trust Property, including Miami Center, shall vest in the Trustee, without further act or deed by the Debtors . .. App. 41.

The plan required the trustee to liquidate and distribute all of the trust property to the creditors of the various bankruptcy estates. It empowered the trustee to “[m]anage, operate, improve, and protect the Trust Property”; to “[pe-lease, convey, or assign any right, title or interest in or about the Trust Property”; and to perform other, similar actions. Id., at 42. The plan said nothing about whether the trustee had to file income tax returns or pay any income tax due. The United States did not object to its confirmation.

The plan took effect on October 10,1985. The trustee appointed by the court, respondent Fred Stanton Smith, immediately sold Miami Center to the Bank in consideration for cash and cancellation of the Bank’s claim. The trustee then distributed these and other assets to third-party creditors. Holywell Corporation filed' a tax return for the fiscal year ending July 31, 1985. The income for this fiscal year included capital gains earned in the sale of the Washington Properties. Holywell asked the trustee to pay the taxes owed. Neither the corporate debtors nor the trustee filed federal income tax returns for any fiscal year ending after July 31,1985. The income for these years included the capital gains earned in the sale of Miami Center and interest earned by reinvesting the proceeds.

In December 1987, the trustee sought a declaratory judgment from the Bankruptcy Court that he had no duty to file income tax returns or pay income tax under the federal income tax laws. The United States and the debtors opposed the action. The Bankruptcy Court declared that the trustee did not have to make any federal tax returns or pay any taxes. 85 B. R. 898 (SD Fla. 1988). The District Court, in an unreported opinion, and the Court of Appeals, 911 F. 2d 1539 (CA11 1990), both affirmed. The United States, in No. 90-1484, and the debtors, in No. 90-1361, each petitioned this Court for a writ of certiorari. We granted review. 500 U. S. 941 (1991).

II

The Internal Revenue Code ties the duty to pay federal income taxes to the duty to make an income tax return. See 26 U. S. C. § 6151(a) (“[W]hen a return of a tax is required . . . the person required to make such return shall . . . pay such tax”). We conclude in this case that the trustee must pay the tax due on the income attributable to the corporate debtors’ property because § 6012(b)(3) requires him to make a return as the “assignee” of the “property ... of a corporation.” We further hold that the trustee must pay the tax due on the income attributable to the individual debtor’s property because § 6012(b)(4) requires him to make a return as the “fiduciary” of a “trust.” Finally, we decide that the United States did not excuse the trustee from these duties by failing to object to the plan.

A

We first consider the trustee’s duties with respect to the corporate debtors. Section 6012(b)(3) provides:

“(3) Receivers, trustees and assignees for corporations “In a case where a receiver, trustee in a case under title 11 of the United States Code, or assignee, by order of a court of competent jurisdiction, by operation of law or otherwise, has possession of or holds title to all or substantially all the property or business of a corporation, whether or not such property or business is being operated, such receiver, trustee, or assignee shall make the return of income for such corporation in the same manner and form as corporations are required to make such returns.”

The parties disagree about whether the trustee in this case is a “receiver,” a “trustee in a case under title 11 of the United States Code [i. e., the Bankruptcy Code],” or an “assignee.” We hold that the trustee is an “assignee” of the corporate debtors under § 6012(b)(3). Because the parties do not argue that the trustee’s duties would differ under another characterization, we decline to consider whether the trustee would qualify as a receiver or bankruptcy trustee.

The plan, as noted above, transferred the corporate debtors’ estates to respondent Smith as trustee for the Miami Center Liquidating Trust. The respondents do not dispute that the trustee meets the usual definition of the word “as-signee” in both ordinary and legal usage. See Webster’s Third New International Dictionary 132 (1986) (defining an “assignee” as “one to whom a right or property is legally transferred”); Black’s Law Dictionary 118-119 (6th ed. 1990) (defining an “assignee” as “[a] person to whom an assignment is made” and an “assignment” as “[tjhe act of transferring to another all or part of one’s property, interest, or rights”); cf. 26 CFR § 301.6036-1(a)(3) (1991) (defining an “as-signee for the benefit of . . . creditors” as any person who takes possession of and liquidates property of a debtor for distribution to creditors). They argue, however, that courts have applied § 6012(b)(3) only in situations in which a person winds up the business of a dissolving corporation, see, e. g., First Nat. Bank of Greeley, Colo. v. United States, 86 F. 2d 938, 942 (CA10 1936), or a person stands in the place of management in operating the day-to-day business of a distressed corporation, see, e. g., Louisville Property Co. v. Commissioner, 140 F. 2d 547, 548 (CA6 1944). They conclude that § 6012(b)(3) cannot apply to the trustee in this case because he did neither. We find this argument unpersuasive.

Nothing in § 6012(b)(3) suggests that the word “assignee” is limited in the manner proposed by the respondents. The statute does not make dissolution necessary; it applies whether the corporation transfers “all” or “substantially all” of its property. It does not require the assignee to manage the corporation’s business after the transfer of property; it expressly requires the assignee to make a return “whether or not [the assigned] property or business is being operated.” Ibid. We therefore conclude that § 6012(b)(3) applies to the trustee in this case. As the assignee of “all” or “substantially all” of the property of the corporate debtors, the trustee must file the returns that the corporate debtors would have filed had the plan not assigned their property to the trustee.

B

We next consider the trustee’s duties with respect to the individual debtor, Theodore B. Gould. The parties agree that § 6012(b)(3) does not require the trustee to file a return as the “assignee” of Gould’s estate because the section applies only to the assignee of the property of a corporation. Section § 6012(b)(4), however, provides:

“(4) Returns of estates and trusts
“Returns of an estate, a trust, or an estate of an individual under chapter 7 or 11 of title 11 of the United States Code shall be made by the fiduciary thereof.”

The United States argues that the trustee must file under § 6012(b)(4) as the fiduciary of Gould’s Chapter 11 “estate.” The debtors join the United States’ argument and also contend in the alternative that the trustee must file under the section as the fiduciary of a “trust.” The respondents insist that the trustee is not acting as the fiduciary of either a bankruptcy estate or a trust within the meaning of § 6012(b)(4). Accordingly, they assert, the section does not require the trustee to file a return on behalf of Gould. We agree with the debtors that the trustee must file a return because he is the fiduciary of a trust of an individual.

The parties agree that Gould originally served as the fiduciary of his own bankruptcy estate when he became debtor in possession. See 11 U. S. C. § 1107(a). At confirmation, according to the United States, the bankruptcy plan substituted the trustee for Gould but did not alter the bankruptcy estate. In other words, the United States argues, the trustee took Gould’s place as the fiduciary of “an estate of an individual under chapter ... 11.” The United States points out that the Bankruptcy Code explicitly provides that a fiduciary may hold and administer property of the estate after confirmation of the plan, see 11 U. S. C/§ 1123(b)(3), and that nothing prohibits the substitution of a third-party trustee for the debtor in possession. The United States, therefore, maintains that the trustee must file a return under § 6012(b)(4).

Whether or not the Bankruptcy Code permits a plan to place a new fiduciary in charge of an estate after confirmation, as the United States contends, we do not believe that a mere substitution occurred in this case. The plan, as quoted above, “declared and established” the new Miami Center Liquidating Trust. It then vested all of the assets of Gould’s estate to respondent Smith as trustee. The plan did not simply substitute the trustee for Gould as the fiduciary of the estate. Rather, it created a separate and distinct trust holding the property of the estate and gave the trustee control of this property. The Bankruptcy Code expressly permits this arrangement. See § 1123(a)(5)(B) (authorizing a plan to transfer “all or any part of the property of the estate to one or more entities, whether organized before or after the confirmation of such plan”). The trustee, therefore, is not acting as the fiduciary of Gould’s bankruptcy estate.

The trustee, nonetheless, must make a return. Section 6012(b)(4), as the debtors assert, applies to the fiduciary of a trust as well as the fiduciary of a bankruptcy estate. We see no way for the respondents to deny that the Miami Center Liquidating Trust is a “trust” and that respondent Smith is its “fiduciary.” A Treasury Regulation states:

“Certain organizations which are commonly known as liquidating trusts are treated as trusts for purposes of the Internal Revenue Code. An organization will be considered a liquidating trust if it is organized for the primary purpose of liquidating and distributing the assets transferred to it, and if its activities are all reasonably necessary to, and consistent with, the accomplishment of that purpose.” 26 CFR §301.7701-4(d) (1991).

The Miami Center Liquidating Trust clearly fits this description. The plan not only describes the entity as a trust, but also created it for the express purpose of liquidating Gould’s estate and distributing it to creditors.

Respondent Smith, moreover, acted as the fiduciary of this trust. The Internal Revenue Code defines “fiduciary” as a “guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.” 26 U. S. C. § 7701(a)(6). A Treasury Regulation further specifies:

“‘Fiduciary’ is a term which applies to persons who occupy positions of peculiar confidence toward others, such as trustees, executors, and administrators. A fiduciary is a person who holds in trust an estate to which another has the beneficial title or in which another has a beneficial interest, or receives and controls income of another, as in the case of receivers.” 26 CFR §301.7701-6 (1991).

The bankruptcy plan, as noted above, assigned the property of Gould’s estate to the trustee and gave him powers consistent with this definition. Smith therefore acted as the fiduciary of a trust within the meaning of § 6012(b)(4).

The respondents raise two principal objections to this conclusion. First, they argue that Gould must pay the Miami Center Liquidating Trust’s income taxes under the so-called “grantor trust” rules in the Internal Revenue Code. See 26 U. S. C. §§671-677. They note, in particular, that Treasury Regulation § 1.677(a)-l(d) specifies that “a grantor is, in general, treated as the owner of a portion of a trust whose income is . . . applied in discharge of a legal obligation of the grantor.” 26 CFR § 1.667(a)-l(d) (1991). They assert that Gould is the grantor of the liquidating trust and that, under this regulation, he owns the trust’s income and must pay taxes on it. To support this position, the respondents cite In re Sonner, 53 B. R. 859 (ED Va. 1985), which applied the grantor trust provisions to a postconfirmation liquidating trust.

While we express no opinion on the results in Sonner, the facts are distinguishable. In Sonner, the property of the bankruptcy estate by the terms of the plan appears to have revested in the debtor upon confirmation. The debtor pursuant to a plan then placed some of this property in a trust created to pay his creditors. Under these circumstances, the Bankruptcy Court concluded, the debtor had created a grantor trust under Treasury Regulation § 1.677(a)-l(d). See Sonner, supra, at 860, 864. In this case, however, the property of Gould’s bankruptcy estate did not revest in Gould. The plan, instead, placed all of the estate’s property directly in the Miami Center Liquidating Trust. Gould himself did not contribute anything to the trust, and we thus fail to see how the respondents can characterize him as the grantor.

Second, the respondents argue that the trustee did not act as a fiduciary because he had almost no discretion in performing his duties under the plan. They assert that the trustee merely acted as a “disbursing agent” who distributed liquidated funds to the creditors. As the dissenting judge noted below, labels and characterizations cannot alter the trustee’s status for the purpose of the tax law. 911 F. 2d, at 1547. Because the liquidating trust is a trust under the Internal Revenue Code and because respondent Smith’s duties under the plan satisfy the description of a fiduciary in the regulations, the restrictions on the trustee’s discretion do not remove him from coverage under § 6012(b)(4).

C

The respondents finally assert that the trustee may ignore the duties imposed by §§ 6012 and 6151 because the Chapter .11 plan does not require him to pay taxes. They note that § 1141(a) of the Bankruptcy Code states that “the provisions of a confirmed plan bind ... any creditor” whether or not the creditor has accepted the plan. They conclude that § 1141(a) precludes the United States, as a creditor, from seeking payment of any taxes. They add that the United States should have objected to the plan if it had wanted a different result. We disagree.

The United States is not seeking from the trustee any taxes that became due prior to his appointment. See Reply Brief for United States 13, n. 16. It simply asserts that the trustee, after his appointment, must make tax returns under § 6012(b) in the same manner as the assignee of the property of any corporation or the trustee of any trust. No tax liability becomes due under § 6151 until the time required for making those returns. See Hartman v. Lauchli, 238 F. 2d 881, 887 (CA8 1956); Pan American Van Lines v. United States, 607 F. 2d 1299, 1301 (CA9 1979). Even if § 1141(a) binds creditors of the corporate and individual debtors with respect to claims that arose before confirmation, we do not see how it can bind the United States or any other creditor with respect to postconfirmation claims. Cf. 11 U. S. C. § 101(10) (1988 ed., Supp. II) (defining “creditor” as used in § 1141(a) as an entity with various kinds of preconfirmation claims). For these reasons, the judgment of the Court of Appeals is

Reversed.

      The respondents also argue that the trustee does not have to pay taxes because the petitioners conceded in the Bankruptcy Court that “the trust is not a separate taxable entity.” 85 B. R. 898, 900 (SD Fla. 1988). This “concession” cannot help the respondents. The petitioners asserted that the trust was not a separate taxable entity when they argued that the plan did not create a new trust but instead simply substituted the trustee for Gould as the fiduciary of the bankruptcy estate. If the respondents accept this position, which we reject above, then they would have to agree that respondent Smith has to make a return as the fiduciary of an estate.


source: Caselaw Access Project

author: Justice White Justice Scalia,

license: Public Domain

text:
    FRANKLIN v. GWINNETT COUNTY PUBLIC SCHOOLS et al.
    No. 90-918.
    Argued December 11, 1991
    Decided February 26, 1992

      White, J., delivered the opinion of the Court, in which Blackmun, Stevens, O’Connoe, Kennedy, and Souter, JJ., joined. Scalia, J., filed an opinion concurring in the judgment, in which Rehnquist, C. J., and Thomas, J., joined, post, p. 76.

      Joel I. Klein argued the cause for petitioner. With him on the briefs were Richard G. Taranto and Michael Weinstock.

      Albert M. Pearson III argued the cause for respondents. With him on the brief were Frank C. Bedinger III and E. Victoria Sweeny.

      Stephen L. Nightingale argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General Starr, Assistant Attorney General Gerson, Deputy Solicitor General Roberts, and John P. Schnitker.

      Briefs of amici curiae urging reversal were filed for the National Women’s Law Center et al. by Marcia D. Greenberger; and for the Lawyers’ Committee for Civil Rights Under Law by William T. Lake, William H. Brown III, Herbert M. Wachtell, Norman Redlich, and Thomas J. Henderson.

        Peter J. Kadzik and Arlene B. Mayerson filed a brief for the American Council of the Blind et al. as amici curiae.

   Justice White

delivered the opinion of the Court.

This case presents the question whether the implied right of action under Title IX of the Education Amendments of 1972, 20 U. S. C. §§ 1681-1688 (Title IX), which this Court recognized in Cannon v. University of Chicago, 441 U. S. 677 (1979), supports a claim for monetary damages.

I

Petitioner Christine Franklin was a student at North Gwinnett High School in Gwinnett County, Georgia, between September 1985 and August 1989. Respondent Gwinnett County School District operates the high school and receives federal funds. According to the complaint filed on December 29, 1988, in the United States District Court for the Northern District of Georgia, Franklin was subjected to continual sexual harassment beginning in the autumn of her tenth grade year (1986) from Andrew Hill, a sports coach and teacher employed by the district. Among other allegations, Franklin avers that Hill engaged her in sexually oriented conversations in which he asked about her sexual experiences with her boyfriend and whether she would consider having sexual intercourse with an older man, Complaint ¶ 10; First Amended Complaint, Exh. A, p. 3; that Hill forcibly kissed her on the mouth in the school parking lot, Complaint ¶ 17; that he telephoned her at her home and asked if she would meet him socially, Complaint ¶ 21; First Amended Complaint, Exh. A, pp. 4-5; and that, on three occasions in her junior year, Hill interrupted a class, requested that the teacher excuse Franklin, and took her to a private office where he subjected her to coercive intercourse, Complaint ¶¶25, 27, 32. The complaint further alleges that though they became aware of and investigated Hill’s sexual harassment of Franklin and other female students, teachers and administrators took no action to halt it and discouraged Franklin from pressing charges against Hill. Complaint ¶¶ 23, 24, 35. On April 14, 1988, Hill resigned on the condition that all matters pending against him be dropped. Complaint ¶¶36, 37. The school thereupon closed its investigation. Complaint ¶ 37.

In this action, the District Court dismissed the complaint on the ground that Title IX does not authorize an award of damages. The Court of Appeals affirmed. 911 F. 2d 617 (CA11 1990). The court noted that analysis of Title IX and Title VI of the Civil Rights Act of 1964, 42 U. S. C. § 2000d et seq. (Title VI), has developed along similar lines. Citing as binding precedent Drayden v. Needville Independent School Dist., 642 F. 2d 129 (CA5 1981), a decision rendered prior to the division of the Fifth Circuit, the court concluded that Title VI did not support a claim for monetary damages. The court then analyzed this Court’s decision in Guardians Assn. v. Civil Service Comm’n of New York City, 463 U. S. 582 (1983), to determine whether it implicitly overruled Drayden. The court stated that the absence of a majority opinion left unresolved the question whether a court could award such relief upon a showing of intentional discrimination. As a second basis for its holding that monetary damages were unavailable, the court reasoned that Title IX was enacted under Congress’ Spending Clause powers and that “[u]nder such statutes, relief may frequently be limited to that which is equitable in nature, with the recipient of federal funds thus retaining the option of terminating such receipt in order to rid itself of an injunction.” 911 F. 2d, at 621. The court closed by observing it would “proceed with extreme care” to afford compensatory relief absent express provision by Congress or clear direction from this Court. Id., at 622. Accordingly, it held that an action for monetary damages could not be sustained for an alleged intentional violation of Title IX, and affirmed the District Court’s ruling to that effect. Ibid.

Because this opinion conflicts with a decision of the Court of Appeals for the Third Circuit, see Pfeiffer v. Marion Center Area School Dist., 917 F. 2d 779, 787-789 (1990), we granted certiorari, 501 U. S. 1204 (1991). We reverse.

II

In Cannon v. University of Chicago, 441 U. S. 677 (1979), the Court held that Title IX is enforceable through an implied right of action. We have no occasion here to reconsider that decision. Rather, in this case we must decide what remedies are available in a suit brought pursuant to this implied right. As we have often stated, the question of what remedies are available under a statute that provides a private right of action is “analytically distinct” from the issue of whether such a right exists in the first place. Davis v. Passman, 442 U. S. 228, 239 (1979). Thus, although we examine the text and history of a statute to determine whether Congress intended to create a right of action, Touche Ross & Co. v. Redington, 442 U. S. 560, 575-576 (1979), we presume the availability of all appropriate remedies unless Congress has expressly indicated otherwise. Davis, supra, at 246-247. This principle has deep roots in our jurisprudence.

A

“[W]here legal rights have been invaded, and a federal statute provides for a general right to sue for such invasion, federal courts may use any available remedy to make good the wrong done.” Bell v. Hood, 327 U. S. 678, 684 (1946). The Court explained this longstanding rule as jurisdictional and upheld the exercise of the federal courts’ power to award appropriate relief so long as a cause of action existed under the Constitution or laws of the United States. Ibid.

The Bell Court’s reliance on this rule was hardly revolutionary. Prom the earliest years of the Republic, the Court has recognized the power of the Judiciary to award appropriate remedies to redress injuries actionable in federal court, although it did not always distinguish clearly between a right to bring suit and a remedy available under such a right. In Marbury v. Madison, 1 Cranch 137, 163 (1803), for example, Chief Justice Marshall observed that our Government “has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve this high appellation, if the laws furnish no remedy for the violation of a vested legal right.” This principle originated in the English common law, and Blackstone described it as “a general and indisputable rule, that where there is a legal right, there is also a legal remedy, by suit or action at law, whenever that right is invaded.” 3 W. Blackstone, Commentaries 23 (1783). See also Ashby v. White, 1 Salk. 19, 21, 87 Eng. Rep. 808, 816 (Q. B. 1702) (“If a statute gives a right, the common law will give a remedy to maintain that right..

In Kendall v. United States ex rel. Stokes, 12 Pet. 524 (1838), the Court applied these principles to an Act of Congress that accorded a right of action in mail carriers to sue for adjustment and settlement of certain claims for extra services but which did not specify the precise remedy available to the carriers. After surveying possible remedies, which included an action against the Postmaster General for monetary damages, the Court held that the carriers were entitled to a writ of mandamus compelling payment under the terms of the statute. “It cannot be denied but that congress had the power to command that act to be done,” the Court stated; “and the power to enforce the performance of the act must rest somewhere, or it will present a case which has often been said to involve a monstrous absurdity in a well organized government, that there should be no remedy, although a clear and undeniable right should be shown to exist. And if the remedy cannot be applied by the circuit court of this district, it exists nowhere.” Id., at 624. Dooley v. United States, 182 U. S. 222, 229 (1901), also restated “the principle that a liability created by statute without a remedy may be enforced by a common-law action.”

The Court relied upon this traditional presumption again after passage of the Federal Safety Appliance Act of 1893, ch. 196, 27 Stat. 531. In Texas & Pacific R. Co. v. Rigsby, 241 U. S. 33 (1916), the Court first had to determine whether the Act supported an implied right of action. After answering that question in the affirmative, the Court then upheld a claim for monetary damages: “A disregard of the command of the statute is a wrongful act, and where it results in damage to one of the class for whose especial benefit the statute was enacted, the right to recover the damages from the party in default is implied, according to a doctrine of the common law . . . .” Id., at 39. The foundation upon which the Bell v. Hood Court articulated this traditional presumption, therefore, was well settled. See also Texas & New Orleans R. Co. v. Railway Clerks, 281 U. S. 548, 569 (1930).

B

Respondents and the United States as amicus curiae, however, maintain that whatever the traditional presumption may have been when the Court decided Bell v. Hood, it has disappeared in succeeding decades. We do not agree. In J I. Case Co. v. Borak, 377 U. S. 426 (1964), the Court adhered to the general rule that all appropriate relief is available in an action brought to vindicate a federal right when Congress has given no indication of its purpose with respect to remedies. Relying on Bell v. Hood, the Borak Court specifically rejected an argument that a court’s remedial power to redress violations of the Securities Exchange Act of 1934 was limited to a declaratory judgment. 377 U. S., at 433-434. The Court concluded that the federal courts “have the power to grant all necessary remedial relief” for violations of the Act. Id., at 435. As Justice Clark’s opinion for the Court observed, this holding closely followed the reasoning of a similar case brought under the Securities Act of 1933, in which the Court had stated:

“ ‘The power to enforce implies the power to make effective the right of recovery afforded by the Act. And the power to make the right of recovery effective implies the power to utilize any of the procedures or actions normally available to the litigant according to the exigencies of the particular case.’” Id., at 433-434 (quoting Deckert v. Independence Shares Corp., 311 U. S. 282, 288 (1940)).

That a statute does not authorize the remedy at issue “in so many words is no more significant than the fact that it does not in terms authorize execution to issue on a judgment.” Id., at 288. Subsequent cases have been true to this position. See, e. g., Sullivan v. Little Hunting Park, Inc., 396 U. S. 229, 239 (1969), stating that the “existence of a statutory right implies the existence of all necessary and appropriate remedies”; Carey v. Piphus, 435 U. S. 247, 255 (1978), upholding damages remedy under Rev. Stat. §1979, 42 U. S. C. § 1983, even though the enacting Congress had not specifically provided such relief.

The United States contends that the traditional presumption in favor of all appropriate relief was abandoned by the Court in Davis v. Passman, 442 U. S. 228 (1979), and that the Bell v. Hood rule was limited to actions claiming constitutional violations. The United States quotes language in Davis to the effect that “the question of who may enforce a statutory right is fundamentally different from the question of who may enforce a right that is protected by the Constitution.” Davis, 442 U. S., at 241. The Government’s position, however, mirrors the very misunderstanding over the difference between a cause of action and the relief afforded under it that sparked the confusion we attempted to clarify in Davis. Whether Congress may limit the class of persons who have a right of action under Title IX is irrelevant to the issue in this lawsuit. To reiterate, “the question whether a litigant has a ‘cause of action’ is analytically distinct and prior to the question of what relief, if any, a litigant may be entitled to receive.” Id., at 239. Davis, therefore, did nothing to interrupt the long line of cases in which the Court has held that if a right of action exists to enforce a federal right and Congress is silent on the question of remedies, a federal court may order any appropriate relief. See id., at 247, n. 26 (contrasting Brown v. GSA, 425 U. S. 820 (1976)).

Contrary to arguments by respondents and the United States that Guardians Assn. v. Civil Service Comm’n of New York City, 463 U. S. 582 (1983), and Consolidated Rail Corporation v. Darrone, 465 U. S. 624 (1984), eroded this traditional presumption, those cases in fact support it. Though the multiple opinions in Guardians suggest the difficulty of inferring the common ground among the Justices in that case, a clear majority expressed the view that damages were available under Title VI in an action seeking remedies for an intentional violation, and no Justice challenged the traditional presumption in favor of a federal court’s power to award appropriate relief in a cognizable cause of action. See Guardians, 463 U. S., at 595 (White, J., joined by Rehnquist, J.); id., at 607-611 (Powell, J., concurring in judgment, joined by Burger, C. J.); id., at 612, and n. 1 (O’Connor, J., concurring in judgment); id., at 624-628 (Marshall, J., dissenting); id., at 636 (Stevens, J., dissenting, joined by Brennan and Blackmun, JJ.). The correctness of this inference was made clear the following Term when the Court unanimously held that the 1978 amendment to § 504 of the Rehabilitation Act of 1973 — which had expressly incorporated the “remedies, procedures, and rights set forth in title VI” (29 U. S. C. § 794a(a)(2)) — authorizes an award of back-pay. In Darrone, the Court observed that a majority in Guardians had “agreed that retroactive relief is available to private plaintiffs for all discrimination .. . that is actionable under Title VI.” 465 U. S., at 630, n. 9. The general rule, therefore, is that absent clear direction to the contrary by Congress, the federal courts have the power to award any appropriate relief in a cognizable cause of action brought pursuant to a federal statute.

1 — 1 J — 1

We now address whether Congress intended to limit application of this general principle in the enforcement of Title IX. See Bush v. Lucas, 462 U. S. 367, 378 (1983); Wyandotte Transportation Co. v. United States, 389 U. S. 191, 200 (1967). Because the cause of action was inferred by the Court in Cannon, the usual recourse to statutory text and legislative history in the period prior to that decision necessarily will not enlighten our analysis. Respondents and the United States fundamentally misunderstand the nature of the inquiry, therefore, by needlessly dedicating large portions of their briefs to discussions of how the text and legislative intent behind Title IX are “silent” on the issue of available remedies. Since the Court in Cannon concluded that this statute supported no express right of action, it is hardly surprising that Congress also said nothing about the applicable remedies for an implied right of action.

During the period prior to the decision in Cannon, the inquiry in any event is not “ ‘basically a matter of statutory construction/” as the United States asserts. Brief for United States as Amicus Curiae 8 (quoting Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U. S. 11, 15 (1979)). Rather, in determining Congress’ intent to limit application of the traditional presumption in favor of all appropriate-relief, we evaluate the state of the law when the Legislature passed Title IX. Cf. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U. S. 353, 378 (1982). In the years before and after Congress enacted this statute, the Court “followed] a common-law tradition [and] regarded the denial of a remedy as the exception rather than the rule.” Id., at 375 (footnote omitted). As we outlined in Part II, this has been the prevailing presumption in our federal courts since at least the early 19th century. In Cannon, the majority upheld an implied right of action in part because in the decade immediately preceding enactment of Title IX in 1972, this Court had found implied rights of action in six cases. In three of those cases, the Court had approved a damages remedy. See, e. g., J. I. Case Co., 377 U. S., at 433; Wyandotte Transportation Co., supra, at 207; Sullivan v. Little Hunting Park, Inc., 396 U. S. 229 (1969). Wholly apart from the wisdom of the Cannon holding, therefore, the same contextual approach used to justify an implied right of action more than amply demonstrates the lack of any legislative intent to abandon the traditional presumption in favor of all available remedies.

In the years after the announcement of Cannon, on the other hand, a more traditional method of statutory analysis is possible, because Congress was legislating with full cognizance of that decision. Our reading of the two amendments to Title IX enacted after Cannon leads us to conclude that Congress did not intend to limit the remedies available in a suit brought under Title IX. In the Rehabilitation Act Amendments of 1986, 100 Stat. 1845, 42 U. S. C. §2000d-7, Congress abrogated the States’ Eleventh Amendment immunity under Title IX, Title VI, § 504 of the Rehabilitation Act of 1973, and the Age Discrimination Act of 1975. This statute cannot be read except as a validation of Cannon’s holding. A subsection of the 1986 law provides that in a suit against a State, “remedies (including remedies both at law and in equity) are available for such a violation to the same extent as such remedies are available for such a violation in the suit against any public or private entity other than a State.” 42 U. S. C. §2000d-7(a)(2). While it is true that this saving clause says nothing about the nature of those other available remedies, cf. Milwaukee v. Illinois, 451 U. S. 304, 329, n. 22 (1981), absent any contrary indication in the text or history of the statute, we presume Congress enacted this statute with the prevailing traditional rule in mind.

In addition to the Rehabilitation Act Amendments of 1986, Congress also enacted the Civil Rights Restoration Act of 1987, Pub. L. 100-259, 102 Stat. 28. Without in any way altering the existing rights of action and the corresponding remedies permissible under Title IX, Title VI, § 504 of the Rehabilitation Act, and the Age Discrimination Act, Congress broadened the coverage of these antidiscrimination provisions in this legislation. In seeking to correct what' it considered to be an unacceptable decision on our part in Grove City College v. Bell, 465 U. S. 555 (1984), Congress made no effort to restrict the right of action recognized in Cannon and ratified in the 1986 Act or to alter the traditional presumption in favor of any appropriate relief for violation of a federal right. We cannot say, therefore, that Congress has limited the remedies available to a complainant in a suit brought under Title IX.

IV

Respondents and the United States nevertheless suggest three reasons why we should not apply the traditional presumption in favor of appropriate relief in this case.

A

First, respondents argue that an award of damages violates separation of powers principles because it unduly expands the federal courts’ power into a sphere properly reserved to the Executive and Legislative Branches. Brief for Respondents 22-25. In making this argument, respondents misconceive the difference between a cause of action and a remedy. Unlike the finding of a cause of action, which authorizes a court to hear a ease or controversy, the discretion to award appropriate relief involves no such increase in judicial power. See generally Note, Federal Jurisdiction in Suits for Damages Under Statutes Not Affording Such Remedy, 48 Colum. L. Rev. 1090,1094-1095 (1948). Federal courts cannot reach out to award remedies when the Constitution or laws of the United States do not support a cause of action. Indeed, properly understood, respondents’ position invites us to abdicate our historic judicial authority to award appropriate relief in cases brought in our court system. It is well to recall that such authority historically has been thought necessary to provide an important safeguard against abuses of legislative and executive power, see Kendall v. United States ex rel. Stokes, 12 Pet. 524 (1838), as well as to ensure an independent Judiciary. See generally Katz, The Jurisprudence of Remedies: Constitutional Legality and the Law of Torts in Bell v. Hood, 117 U. Pa. L. Rev. 1, 16-17 (1968). Moreover, selective abdication of the sort advocated here would harm separation of powers principles in another way, by giving judges the power to render inutile causes of action authorized by Congress through a decision that no remedy is available.

B

Next, consistent with the Court of Appeals’ reasoning, respondents and the United States contend that the normal presumption in favor of all appropriate remedies should not apply because Title IX was enacted pursuant to Congress’ Spending Clause power. In Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 28-29 (1981), the Court observed that remedies were limited under such Spending Clause statutes when the alleged violation was unintentional. Respondents and the United States maintain that this presumption should apply equally to intentional violations. We disagree. The point of not permitting monetary damages for an unintentional violation is that the receiving entity of federal funds lacks notice that it will be liable for a monetary award. See id., at 17. This notice problem does not arise in a case such as this, in which intentional discrimination is alleged. Unquestionably, Title IX placed on the Gwinnett County Public Schools the duty not to discriminate on the basis of sex, and “when a supervisor sexually harasses a subordinate because of the subordinate’s sex, that supervisor ‘discriminate^]’ on the basis of sex.” Meritor Sav. Bank, FSB v. Vinson, 477 U. S. 57, 64 (1986). We believe the same rule should apply when a teacher sexually harasses and abuses a student. Congress surely did not intend for federal moneys to be expended to support the intentional actions it sought by statute to proscribe. Moreover, the notion that Spending Clause statutes do not authorize monetary awards for intentional violations is belied by our unanimous holding in Darrone. See 465 U. S., at 628. Respondents and the United States characterize the backpay remedy in Darrone as equitable relief, but this description is irrelevant to their underlying objection: that application of the traditional rule in this case will require state entities to pay monetary awards out of their treasuries for intentional violations of federal statutes.

C

Finally, the United States asserts that the remedies permissible under Title IX should nevertheless be limited to backpay and prospective relief. In addition to diverging from our traditional approach to deciding what remedies are available for violation of a federal right, this position conflicts with sound logic. First, both remedies are equitable in nature, and it is axiomatic that a court should determine the adequacy of a remedy in law before resorting to equitable relief. Under the ordinary convention, the proper inquiry would be whether monetary damages provided an adequate remedy, and if not, whether equitable relief would be appropriate. Whitehead v. Shattuck, 138 U. S. 146, 160 (1891). See generally C. McCormick, Damages 1 (1935). Moreover, in this case the equitable remedies suggested by respondent and the Federal Government are clearly inadequate. Backpay does nothing for petitioner, because she was a student when the alleged discrimination occurred. Similarly, because Hill — the person she claims subjected her to sexual harassment — no longer teaches at the school and she herself no longer attends a school in the Gwinnett system, prospective relief accords her no remedy at all. The Government’s answer that administrative action helps other similarly situated students in effect acknowledges that its approach would leave petitioner remediless.

V

In sum, we conclude that a damages remedy is available for an action brought to enforce Title IX. The judgment of the Court of Appeals, therefore, is reversed, and the case is remanded for further proceedings consistent with this opinion.

So ordered.

Justice Scalia,

with whom The .Chief Justice and Justice Thomas join, concurring in the judgment.

The substantive right at issue here is one that Congress did not expressly create, but that this Court found to be “implied.” See Cannon v. University of Chicago, 441 U. S. 677 (1979). Quite obviously, the search for what was Congress’ remedial intent as to a right whose very existence Congress did not expressly acknowledge is unlikely to succeed, see ante, at 71; it is “hardly surprising,” as the Court says, ibid., that the usual sources yield no explicit answer.

The Court finds an implicit answer, however, in the legislators' presumptive awareness of our practice of using “any available remedy” to redress violations of legal rights. Bell v. Hood, 327 U. S. 678, 684 (1946); see ante, at 72-73. This strikes me as question begging. We can plausibly assume acquiescence in our Bell v. Hood presumption when the Legislature says nothing about remedy in expressly creating a private right of action; perhaps even when it says nothing about remedy in creating a private right of action by clear textual implication; but not, I think, when it says nothing about remedy in a statute in which the courts divine a private right of action on the basis of “contextual” evidence such as that in Cannon, which charged Congress with knowledge of a court of appeals’ creation of a cause of action under a similarly worded statute. See Cannon, supra, at 696-698. Whatever one thinks of the validity of the last approach, it surely rests on attributed rather than actual congressional knowledge. It does not demonstrate an explicit legislative decision to create a cause of action, and so could not be expected to be accompanied by a legislative decision to alter the application of Bell v. Hood. Given the nature of Cannon and some of our earlier “implied right of action” cases, what the Court’s analytical construct comes down to is this: Unless Congress expressly legislates a more limited remedial policy with respect to rights of action it does not know it is creating, it intends the full gamut of remedies to be applied.

In my view, when rights of action are judicially “implied,” categorical limitations upon their remedial scope may be judicially implied as well. Cf. Cort v. Ash, 422 U. S. 66, 84-85 (1975). Although we have abandoned the expansive rights-creating approach exemplified by Cannon, see Touche Ross & Co. v. Redington, 442 U. S. 560, 575-576 (1979); Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U. S. 11, 18, 23-24 (1979) — and perhaps ought to abandon the notion of implied causes of action entirely, see Thompson v. Thompson, 484 U. S. 174, 191 (1988) (Scalia, J., concurring in judgment) — causes of action that came into existence under the anden regime should be limited by the same logic that gave them birth. To require, with respect to a right that is not consciously and intentionally created, that any limitation of remedies must be express, is to provide, in effect, that the most questionable of private rights will also be the most expansively remediable. As the United States puts it, “[wjhatever the merits of ‘implying’ rights of action may be, there is no justification for treating [congressional] silence as the equivalent of the broadest imaginable grant of remedial authority.” Brief for United States as Amicus Curiae 12-13.

I nonetheless agree with the Court’s disposition of this case. Because of legislation enacted subsequent to Cannon, it is too late in the day to address whether a judicially implied exclusion of damages under Title IX would be appropriate. The Rehabilitation Act Amendments of 1986, 42 U. S. C. § 2000d-7(a)(2), must be read, in my view, not only “as a validation of Cannon’s holding,” ante, at 72, but also as an implicit acknowledgment that damages are available. See 42 U. S. C. § 2000d-7(a)(l) (withdrawing the States’ Eleventh Amendment immunity); § 2000d-7(a)(2) (providing that, in suits against States, “remedies (including remedies both at law and in equity) are available for [violations of Title IX] to the same extent as such remedies are available for such a violation in the suit against any public or private entity other than a State”). I therefore concur in the judgment.

       This statute provides in pertinent part that “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.” 20 U.S.C. § 1681(a).

       This exhibit is the report of the United States Department of Education’s Office for Civil Rights based on that office’s investigation of this case. Franklin incorporated this exhibit into her amended complaint.

       Prior to bringing this lawsuit, Franklin filed a complaint with the Office for Civil Rights of the United States Department of Education (OCR) in August 1988. After investigating these charges for several months, OCR concluded that the school district had violated Franklin’s rights by subjecting her to physical and verbal sexual harassment and by interfering with her right to complain about conduct proscribed by Title IX. OCR determined, however, that because of the resignations of Hill and respondent William Prescott and the implementation of a school grievance procedure, the district had come into compliance with Title IX. It then terminated its investigation. First Amended Complaint, Exh. A, pp. 7-9.

       The court also rejected an argument by Franklin that the terms of outright prohibition of Title VII, 42 U. S. C. §§2000e to 2000e-17, apply by analogy to Title IX’s antidiscrimination provision, and that the remedies available under the two statutes should also be the same. 911 F. 2d, at 622. Because Franklin does not pursue this contention here, we need not address whether it has merit.

       Judge Johnson concurred specially, writing that the result was controlled by Drayden v. Needville Independent School Dist., 642 F. 2d 129 (CA5 1981), and that there was no need to address whether Titles VI and IX are grounded solely in the Spending Clause and whether Title VII analysis should apply to an action under Titles VI or IX. See 911 F. 2d, at 622-623.

       Cases cited by respondents and the United States since Davis are inap-posite, either because they involved holdings that plaintiffs had no right of action, see, e. g., Virginia Bankshares, Inc. v. Sandberg, 501 U. S. 1083 (1991); Karahalios v. Federal Employees, 489 U. S. 527 (1989); Thompson
        v. Thompson, 484 U. S. 174 (1988); Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630 (1981); California v. Sierra Club, 451 U. S. 287 (1981); Northwest Airlines, Inc. v. Transport Workers, 451 U. S. 77 (1981); Touche Ross & Co. v. Redington, 442 U. S. 560 (1979); Securities Investor Protection Corp. v. Barbour, 421 U. S. 412 (1975); or because the Court rejected a claim for damages under a statute that expressly enumerated the remedies available to plaintiffs, Massachusetts Mut. Life Ins. Co. v. Russell, 473 U. S. 134 (1985).

        J. I. Case Co. v. Borak, 377 U. S. 426 (1964); Wyandotte Transportation Co. v. United States, 389 U. S. 191 (1967); Jones v. Alfred H. Mayer Co., 392 U. S. 409 (1968); Allen v. State Bd. of Elections, 393 U. S. 544 (1969); Sullivan v. Little Hunting Park, Inc., 396 U. S. 229 (1969); and Superintendent of Ins. of New York v. Bankers Life & Casualty Co., 404 U. S. 6 (1971).

       Franklin argues that, in any event, Title IX should not be viewed solely as having been enacted under Congress’ Spending Clause powers and that it also rests on powers derived from § 5 of the Fourteenth Amendment. See Brief for Petitioner 19, n. 10. Because we conclude that a money damages remedy is available under Title IX for an intentional violation irrespective of the constitutional source of Congress’ power to enact the statute, we need not decide which power Congress utilized in enacting Title IX.


author: Justice Blackmun

text:
    INDOPCO, INC. v. COMMISSIONER OF INTERNAL REVENUE
    No. 90-1278.
    Argued November 12, 1991
    Decided February 26, 1992
    Blackmun, J,, delivered the opinion for a unanimous Court.

      Richard J. Hiegel argued the cause for petitioner. With him on the briefs were Geoffrey R. S. Brown, Rory 0. Mill-son, and Richard H. Walker.

      Kent L. Jones argued the cause for respondent. With him on the brief were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Wallace, Gilbert S. Rothenberg, and Bruce R. Ellisen,

        Timothy J. McCormally and Mary L. Fahey filed a brief for the Tax Executives Institute, Inc., as amicus curiae urging reversal.

   Justice Blackmun

delivered the opinion of the Court.

In this case we must decide whether certain professional expenses incurred by a target corporation in the course of a friendly takeover are deductible by that corporation as “ordinary and necessary” business expenses under § 162(a) of the Internal Revenue Code.

I

Most of the relevant facts are stipulated. See App. 12, 149. Petitioner INDOPCO, Inc., formerly named National Starch and Chemical Corporation and hereinafter referred to as National Starch, is a Delaware corporation that manufactures and sells adhesives, starches, and specialty chemical products. In October 1977, representatives of Unilever United States, Inc., also a Delaware corporation (Unilever), expressed interest in acquiring National Starch, which was one of its suppliers, through a friendly transaction. National Starch at the time had outstanding over 6,563,000 common shares held by approximately 3,700 shareholders. The stock was listed on the New York Stock Exchange. Frank and Anna Greenwall were the corporation’s largest shareholders and owned approximately 14.5% of the common. The Greenwalls, getting along in years and concerned about their estate plans, indicated that they would transfer their shares to Unilever only if a transaction tax free for them could be arranged.

Lawyers representing both sides devised a “reverse subsidiary cash merger” that they felt would satisfy the Green-walls’ concerns. Two new entities would be created — National Starch and Chemical Holding Corp. (Holding), a subsidiary of Unilever, and NSC Merger, Inc., a subsidiary of Holding that would have only a transitory existence. In an exchange specifically designed to be tax free under § 351 of the Internal Revenue Code, 26 U. S. C. §351, Holding would exchange one share of its nonvoting preferred stock for each share of National Starch common that it received from National Starch shareholders. Any National Starch common that was not so exchanged would be converted into cash in a merger of NSC Merger, Inc., into National Starch.

In November 1977, National Starch’s directors were formally advised of Unilever’s interest and the proposed transaction. At that time, Debevoise, Plimpton, Lyons & Gates, National Starch’s counsel, told the directors that under Delaware law they had a fiduciary duty to ensure that the proposed transaction would be fair to the shareholders. National Starch thereupon engaged the investment banking firm of Morgan Stanley & Co., Inc., to evaluate its shares, to render a fairness opinion, and generally to assist in the event of the emergence of a hostile tender offer.

Although Unilever originally had suggested a price between $65 and $70 per share, negotiations resulted in a final offer of $73.50 per share, a figure Morgan Stanley found to be fair. Following approval by National Starch’s board and the issuance of a favorable private ruling from the Internal Revenue Service that the transaction would be tax free under § 351 for those National Starch shareholders who exchanged their stock for Holding preferred, the transaction was consummated in August 1978.

Morgan Stanley charged National Starch a fee of $2,200,000, along with $7,586 for out-of-pocket expenses and $18,000 for legal fees. The Debevoise firm charged National Starch $490,000, along with $15,069 for out-of-pocket expenses. National Starch also incurred expenses aggregating $150,962 for miscellaneous items — such as accounting, printing, proxy solicitation, and Securities and Exchange Commission fees — in connection with the transaction. No issue is raised as to the propriety or reasonableness of these charges.

On its federal income tax return for its short taxable year ended August 15, 1978, National Starch claimed a deduction for the $2,225,586 paid to Morgan Stanley, but did not deduct the $505,069 paid to Debevoise or the other expenses. Upon audit, the Commissioner of Internal Revenue disallowed the claimed deduction and issued a notice of deficiency. Petitioner sought redetermination in the United States Tax Court, asserting, however, not only the right to deduct the investment banking fees and expenses but, as well, the legal and miscellaneous expenses incurred.

The Tax Court, in an unreviewed decision, ruled that the expenditures were capital in nature and therefore not deductible under § 162(a) in the 1978 return as “ordinary and necessary expenses.” National Starch and Chemical Corp. v. Commissioner, 93 T. C. 67 (1989). The court based its holding primarily on the long-term benefits that accrued to National Starch from the Unilever acquisition. Id., at 75. The United States Court of Appeals for the Third Circuit affirmed, upholding the Tax Court’s findings that “both Unilever’s enormous resources and the possibility of synergy arising from the transaction served the long-term betterment of National Starch.” National Starch & Chemical Corp. v. Commissioner, 918 F. 2d 426, 432-433 (1990). In so doing, the Court of Appeals rejected National Starch’s contention that, because the disputed expenses did not “create or enhance ... a separate and distinct additional asset,” see Commissioner v. Lincoln Savings & Loan Assn., 403 U. S. 345, 354 (1971), they could not be capitalized and therefore were deductible under § 162(a). 918 F. 2d, at 428-431. We granted certiorari to resolve a perceived conflict on the issue among the Courts of Appeals. 500 U. S. 914 (1991).

II

Section 162(a) of the Internal Revenue Code allows the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” 26 U. S. C. § 162(a). In contrast, §263 of the Code allows no deduction for a capital expenditure — an “amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate.” § 263(a)(1). The primary effect of characterizing a payment as either a business expense or a capital expenditure concerns the timing of the taxpayer’s cost recovery: While business expenses are currently deductible, a capital expenditure usually is amortized and depreciated over the life of the relevant asset, or, where no specific asset or useful life can be ascertained, is deducted upon dissolution of the enterprise. See 26 U. S. C. §§ 167(a) and 336(a); Treas. Reg. § 1.167(a), 26 CFR § 1.167(a) (1991). Through provisions such as these, the Code endeavors to match expenses with the revenues of the taxable period to which they are properly attributable, thereby resulting in a more accurate calculation of net income for tax purposes. See, e. g., Commissioner v. Idaho Power Co., 418 U. S. 1, 16 (1974); Ellis Banking Corp. v. Commissioner, 688 F. 2d 1376, 1379 (CA11 1982), cert. denied, 463 U. S. 1207 (1983).

In exploring the relationship between deductions and capital expenditures, this Court has noted the “familiar rule” that “an income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer.” Interstate Transit Lines v. Commissioner, 319 U. S. 590, 593 (1943); Deputy v. Du Pont, 308 U. S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U. S. 435, 440 (1934). The notion that deductions are exceptions to the norm of capitalization finds support in various aspects of the Code. Deductions are specifically enumerated and thus are subject to disallowance in favor of capitalization. See §§161 and 261. Nondeductible capital expenditures, by contrast, are not exhaustively enumerated in the Code; rather than providing a “complete list of nondeductible expenditures,” Lincoln Savings, 403 U. S., at 358, § 263 serves as a general means of distinguishing capital expenditures from current expenses. See Commissioner v. Idaho Power Co., 418 U. S., at 16. For these reasons, deductions are strictly construed and allowed only “as there is a clear provision therefor.” New Colonial Ice Co. v. Helvering, 292 U. S., at 440; Deputy v. Du Pont, 308 U. S., at 493.

The Court also has examined the interrelationship between the Code’s business expense and capital expenditure provisions. In so doing, it has had occasion to parse § 162(a) and explore certain of its requirements. For example, in Lincoln Savings, we determined that, to qualify for deduction under § 162(a), “an item must (1) be ‘paid or incurred during the taxable year,’ (2) be for ‘carrying on any trade or business,’ (3) be an ‘expense,’ (4) be a ‘necessary’ expense, and (5) be an ‘ordinary’ expense.” 403 U. S., at 352. See also Commissioner v. Tellier, 383 U. S. 687, 689 (1966) (the term “necessary” imposes “only the minimal requirement that the expense be ‘appropriate and helpful’ for ‘the development of the [taxpayer’s] business,’” quoting Welch v. Helvering, 290 U. S. 111, 113 (1933)); Deputy v. Du Pont, 308 U. S., at 495 (to qualify as “ordinary,” the expense must relate to a transaction “of common or frequent occurrence in the type of business involved”)- The Court has recognized, however, that the “decisive distinctions” between current ex-, penses and capital expenditures “are those of degree and not of kind,” Welch v. Helvering, 290 U. S., at 114, and that because each case “turns on its special facts,” Deputy v. Du Pont, 308 U. S., at 496, the cases sometimes appear difficult to harmonize. See Welch v. Helvering, 290 U. S., at 116.

National Starch contends that the decision in Lincoln Savings changed these familiar backdrops and announced an exclusive test for identifying capital expenditures, a test in which “creation or enhancement of an asset” is a prerequisite to capitalization, and deductibility under § 162(a) is the rule rather than the exception. Brief for Petitioner 16. We do not agree, for we conclude that National Starch has overread Lincoln Savings.

In Lincoln Savings, we were asked to decide whether certain premiums, required by federal statute to be paid by a savings and loan association to the Federal Savings and Loan Insurance Corporation (FSLIC), were ordinary and necessary expenses under § 162(a), as Lincoln Savings argued and the Court of Appeals had held, or capital expenditures under §263, as the Commissioner contended. We found that the “additional” premiums, the purpose of which was to provide FSLIC with a secondary reserve fund in which each insured institution retained a pro rata interest recoverable in certain situations, “serv[e] to create or enhance for Lincoln what is essentially a separate and distinct additional asset.” 403 U. S., at 364. “[A]s an inevitable consequence,” we concluded, “the payment is capital in nature and not an expense, let alone an ordinary expense, deductible under § 162(a).” Ibid.

Lincoln Savings stands for the simple proposition that a taxpayer’s expenditure that “serves to create or enhance ... a separate and distinct” asset should be capitalized under § 263. It by no means follows, however, that only expenditures that create or enhance separate and distinct assets are to be capitalized under § 263. We had no occasion in Lincoln Savings to consider the tax treatment of expenditures that, unlike the additional premiums at issue there, did not create or enhance a specific asset, and thus the case cannot be read to preclude capitalization in other circumstances. In short, Lincoln Savings holds that the creation of a separate and distinct asset well may be a sufficient, but not a necessary, condition to classification as a capital expenditure. See General Bancshares Corp. v. Commissioner, 326 F. 2d 712, 716 (CA8) (although expenditures may not “resul[t] in the acquisition or increase of a corporate asset,... these expenditures are not, because of that fact, deductible as ordinary and necessary business expenses”), cert. denied, 379 U. S. 832 (1964).

Nor does our statement in Lincoln Savings, 403 U. S., at 354, that “the presence of an ensuing benefit that may have some future aspect is not controlling” prohibit reliance on future benefit as a means of distinguishing an ordinary business expense from a capital expenditure. Although the mere presence of an incidental future benefit — “some future aspect” — may not warrant capitalization, ja .taxpayer’s realization of benefits beyond the year in which the expenditure is incurred is undeniably important in determining whether the appropriate tax treatment is immediate deduction or capitalization. See United States v. Mississippi Chemical Corp., 405 U. S. 298, 310 (1972) (expense that “is of value in more than one taxable year” is a nondeductible capital expenditure); Central Texas Savings & Loan Assn. v. United States, 731 F. 2d 1181, 1183 (CA5 1984) (“While the period of the benefits may not be controlling in all cases, it nonetheless remains a prominent, if not predominant, characteristic of a capital item”). Indeed, the text of the Code’s capitalization provision, § 263(a)(1), which refers to “permanent improvements or betterments,” itself envisions an inquiry into the duration and extent of the benefits realized by the taxpayer.

III

In applying the foregoing principles to the specific expenditures at issue in this case, we conclude that National Starch has not demonstrated that the investment banking, legal, and other costs it incurred in connection with Unilever’s acquisition of its shares are deductible as ordinary and necessary business expenses under § 162(a).

Although petitioner attempts to dismiss the benefits that accrued to National Starch from the Unilever acquisition as “entirely speculative” or “merely incidental,” Brief for Petitioner 39-40, the Tax Court’s and the Court of Appeals’ findings that the transaction produced significant benefits to National Starch that extended beyond the tax year in question are amply supported by the record. For example, in commenting on the merger with Unilever, National Starch’s 1978 “Progress Report” observed that the company would “benefit greatly from the availability of Unilever’s enormous resources, especially in the area of basic technology.” App. 43. See also id., at 46 (Unilever “provides new opportunities and resources”). Morgan Stanley’s report to the National Starch board concerning the fairness to shareholders of a possible business combination with Unilever noted that National Starch management “feels that some synergy may exist with the Unilever organization given a) the nature of the Unilever chemical, paper, plastics and packaging operations . . . and b) the strong consumer products orientation of Unilever United States, Inc.” Id., at 77-78.

In addition to these anticipated resource-related benefits, National Starch obtained benefits through its transformation from a publicly held, freestanding corporation into a wholly owned subsidiary of Unilever. The Court of Appeals noted that National Starch management viewed the transaction as “'swapping approximately 3500 shareholders for one.’” 918 F. 2d, at 427; see also App. 223. Following Unilever’s acquisition of National Starch’s outstanding shares, National Starch was no longer subject to what even it terms the “substantial” shareholder-relations expenses a publicly traded corporation incurs, including reporting and disclosure obligations, proxy battles, and derivative suits. Brief for Petitioner 24. The acquisition also allowed National Starch, in the interests of administrative convenience and simplicity, to eliminate previously authorized but unissued shares of preferred and to reduce the total number of authorized shares of common from 8,000,000 to 1,000. See 93 T. C., at 74.

Courts long have recognized that expenses such as these, “ ‘incurred for the purpose of changing the corporate structure for the benefit of future operations are not ordinary and necessary business expenses.’” General Bancshares Corp. v. Commissioner, 326 F. 2d, at 715 (quoting Farmers Union Corp. v. Commissioner, 300 F. 2d 197, 200 (CA9), cert. denied, 371 U. S. 861 (1962)). See also B. Bittker & J. Eustice, Federal Income Taxation of Corporations and Shareholders 5-33 to 5-36 (5th ed. 1987) (describing “well-established rule” that expenses incurred in reorganizing or restructur-. ing corporate entity are not deductible under § 162(a)). Deductions for professional expenses thus have been disallowed in a wide variety of cases concerning changes in corporate structure. Although support for these decisions can be found in the specific terms of § 162(a), which require that deductible expenses be “ordinary and necessary” and incurred “in carrying on any trade or business,” courts more frequently have characterized an expenditure as capital in nature because “the purpose for which the expenditure is made has to do with the corporation’s operations and betterment, sometimes with a continuing capital asset, for the duration of its existence or for the indefinite future or for a time somewhat longer than the current taxable year.” General Bancshares Corp. v. Commissioner, 326 F. 2d, at 715. See also Mills Estate, Inc. v. Commissioner, 206 F. 2d 244, 246 (CA2 1953). The rationale behind these decisions applies equally to the professional charges at issue in this case.

IV

The expenses that National Starch incurred in Unilever’s friendly takeover do not qualify for deduction as “ordinary and necessary” business expenses under § 162(a). The fact that the expenditures do not create or enhance a separate and distinct additional asset is not controlling; the acquisition-related expenses bear the indicia of capital expenditures and are to be treated as such.

The judgment of the Court of Appeals is affirmed.

It is so ordered.

       Unilever is a holding company. Its then principal subsidiaries were Lever Brothers Co. and Thomas 'J. Lipton, Inc.

       Approximately 21% of National Starch common was exchanged for Holding preferred. The remaining 79% was exchanged for cash. App. 14.

       Compare the Third Circuit’s opinion, 918 F. 2d, at 430, with NCNB Corp. v. United States, 684 F. 2d 285, 293-294 (CA4 1982) (bank expenditures for expansion-related planning reports, feasibility studies, and regulatory applications did not “create or enhance separate and identifiable assets,” and therefore were ordinary and necessary expenses under § 162(a)), and Briarcliff Candy Corp. v. Commissioner, 475 F. 2d 776, 782 (CA2 1973) (suggesting that Lincoln Savings “brought about a radical shift in emphasis,” making capitalization dependent on whether the expenditure creates or enhances a separate and distinct additional asset). See also Central Texas Savings & Loan Assn. v. United States, 731 F. 2d 1181, 1184 (CA5 1984) (inquiring whether establishment of new branches “creates a separate and distinct additional asset” so that capitalization is the proper tax treatment).

       See also Johnson, The Expenditures Incurred by the Target Corporation in an Acquisitive Reorganization are Dividends to the Shareholders, 53 Tax Notes 463, 478 (1991) (noting the importance of a “strong law of capitalization” to the tax system).

       See, e. g., Commissioner v. Idaho Power Co., 418 U. S. 1 (1974) (equipment depreciation allocable to construction of capital facilities is to be capitalized); United States v. Mississippi Chemical Corp., 405 U. S. 298 (1972) (cooperatives’ required purchases of stock in Bank for Cooperatives are not currently deductible); Commissioner v. Lincoln Savings & Loan Assn., 403 U. S. 345 (1971) (additional premiums paid by bank to federal insurers are capital expenditures); Woodward v. Commissioner, 397 U. S. 572 (1970) (legal, accounting, and appraisal expenses incurred in purchasing minority stock interest are capital expenditures); United States v. Hilton Hotels Corp., 397 U. S. 580 (1970) (consulting, legal, and other professional fees incurred by acquiring firm in minority stock appraisal proceeding are capital expenditures); Commissioner v. Tellier, 383 U. S. 687 (1966) (legal expenses incurred in defending against securities fraud charges are deductible under § 162(a)); Commissioner v. Heininger, 320 U. S. 467 (1943) (legal expenses incurred in disputing adverse postal designation are deductible as ordinary and necessary expenses); Interstate Transit Lines v. Commissioner, 319 U. S. 590 (1943) (payment by parent company to cover subsidiary’s operating deficit is not deductible as a business expense); Deputy v. Du Pont, 308 U. S. 488 (1940) (expenses incurred by shareholder in helping executives of company acquire stock are not deductible); Helvering v. Winmill, 305 U. S. 79 (1938) (brokerage commissions are capital expenditures); Welch v. Helvering, 290 U. S. 111 (1933) (payments of former employer’s debts are capital expenditures).

       Petitioner contends that, absent a separate-and-distinct-asset requirement for capitalization, a taxpayer will have no “principled basis” upon which to differentiate business expenses from capital expenditures. Brief for Petitioner 37-41. We note, however, that grounding tax status on the existence of an asset would be unlikely to produce the bright-line rule that petitioner desires, given that the notion of an “asset” is itself flexible and amorphous. See Johnson, 53 Tax Notes, at 477-478.

       See, e. g., McCrory Corp. v. United States, 651 F. 2d 828 (CA2 1981) (statutory merger under 26 U. S. C. §368(a)(1)(A)); Bilar Tool & Die Corp. v. Commissioner, 530 F. 2d 708 (CA6 1976) (division of corporation into two parts); E. I. du Pont de Nemours & Co. v. United States, 432 F. 2d 1052 (CA3 1970) (creation of new subsidiary to hold assets of prior joint venture); General Bancshares Corp. v. Commissioner, 326 F. 2d 712, 715 (CA8) (stock dividends), cert. denied, 379 U. S. 832 (1964); Mills Estate, Inc. v. Commissioner, 206 F. 2d 244 (CA2 1953) (recapitalization).

       See, e. g., Motion Picture Capital Corp. v. Commissioner, 80 F. 2d 872, 873-874 (CA2 1936) (recognizing that expenses may be “ordinary and necessary” to corporate merger, and that mergers may be “ordinary and necessary business occurrences,” but declining to find that merger is part of “ordinary and necessary business activities,” and concluding that expenses are therefore not deductible); Greenstein, The Deductibility of Takeover Costs After National. Starch, 69 Taxes 48, 49 (1991) (expenses incurred to facilitate transfer of business ownership do not satisfy the “carrying on [a] trade or business” requirement of § 162(a)).