Also known as: net proceed · net amount realized
Written by attorneys — see sources below.
The amount received from a sale or other transaction after subtracting the costs of completing the transaction such as expenses and commissions.
Nordic Ventures sued a buyer for the price of identified goods still in its control. After the buyer repudiated, Nordic resold the goods and applied the amount received after deducting resale commissions and storage fees to reduce the judgment. The buyer received credit for that reduced sum upon satisfying the judgment and took the remaining goods.
A state-owned railroad generated revenue from freight operations. After paying operating expenses the state applied the remaining sum to harbor improvements. The court examined whether those remaining funds counted toward the state's sovereign functions.
The original Fair Labor Standards Act passed in 1938 specifically excluded the States and their political sub-divisions from its coverage. Amendments in 1961 extended coverage to employees of enterprises engaged in commerce, and 1966 amendments removed the exemption for employees of state hospitals, institutions, and schools. The Supreme Court upheld the 1966 amendments in Maryland v. Wirtz in 1968. In 1974, Congress amended the Act to include a public agency within the definition of employer and to deem employees of public agencies as engaged in commerce. These amendments applied the Act's requirements to almost all public employees of the States and their subdivisions, subject only to the general exemption for executive, administrative, or professional personnel and certain officeholders. Appellants consisting of the National League of Cities, numerous States, and municipalities challenged these amendments. The appellants alleged in their complaint that compliance would impose significant additional costs, including $938,000 per year for the Metropolitan Government of Nashville and Davidson County for police and fire protection, $2.5 million annually for Arizona, and between $8 million and $16 million for California. They further claimed that the overtime provisions would force reductions in training programs, such as shortening the California Highway Patrol academy from 2,080 to 960 hours, and curtail affirmative action and internship programs in cities like Inglewood and Clovis. A three-judge district court was convened and dismissed the complaint for failure to state a claim, stating that it was bound by Maryland v. Wirtz despite finding the contentions substantial. The Supreme Court noted probable jurisdiction, heard initial argument in 1975, reargued the case in March 1976, and issued its decision on June 24, 1976.
View caseSpouses sold property subject to a federal tax lien. The IRS released the lien for the closing on the condition that half the amount received after paying sale costs be held in escrow. The court later determined the government's interest in those escrowed funds.
In 1988, the Internal Revenue Service assessed $482,446 in unpaid income tax liabilities against Don Craft for his failure to file federal income tax returns for the years 1979 through 1986. At that time, Don Craft and his wife, respondent Sandra L. Craft, owned a piece of real property in Grand Rapids, Michigan, as tenants by the entirety. After notice of the federal tax lien was filed, the Crafts jointly executed a quitclaim deed purporting to transfer Don Craft's interest in the property to Sandra Craft for one dollar. When Sandra Craft later attempted to sell the property, a title search revealed the lien. The IRS agreed to release the lien to allow the sale on the condition that half of the net proceeds be held in escrow pending determination of the Government's interest. Sandra Craft then brought an action in the United States District Court for the Western District of Michigan to quiet title to the escrowed proceeds. The District Court granted summary judgment to the Government. On appeal, the United States Court of Appeals for the Sixth Circuit held that the tax lien did not attach to the property under Michigan law and remanded for consideration of the Government's fraudulent conveyance claim. On remand, the District Court found that the conveyance itself was not fraudulent but that the use of nonexempt funds to pay the mortgage constituted a fraudulent act, and it awarded the IRS a share of the proceeds. The Sixth Circuit affirmed that determination on the lien issue as law of the case. The Supreme Court granted certiorari to consider whether Don Craft had a separate interest in the entireties property to which the federal tax lien attached.
View caseHoffman sold the bakery building at defendants' request. The amount received after the sale loss became part of the cash he needed to invest in the new store. The court included that reduced sum when calculating reliance damages.
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View caseInvestors in a citrus grove venture received periodic payments from the operator. The operator forwarded the amount collected from fruit sales after deducting cultivation and marketing expenses. The court treated those payments as the investors' return on the enterprise.
In 1979, petitioner Sedima, a Belgian corporation, entered into a joint venture with respondent Imrex Co. to provide electronic components to a Belgian firm. The buyer was to order parts through Sedima. Imrex was to obtain the parts in this country and ship them to Europe. The agreement called for Sedima and Imrex to split the net proceeds. Imrex filled roughly $8 million in orders placed with it through Sedima. Sedima became convinced that Imrex was presenting inflated bills, cheating Sedima out of a portion of its proceeds by collecting for nonexistent expenses. In 1982, Sedima filed this action in the Federal District Court for the Eastern District of New York. The complaint set out common-law claims of unjust enrichment, conversion, and breach of contract, fiduciary duty, and a constructive trust. In addition, it asserted RICO claims under § 1964(c) against Imrex and two of its officers. Two counts alleged violations of § 1962(c), based on predicate acts of mail and wire fraud. A third count alleged a conspiracy to violate § 1962(c). Claiming injury of at least $175,000, the amount of the alleged overbilling, Sedima sought treble damages and attorney's fees. The District Court held that for an injury to be "by reason of a violation of section 1962," as required by § 1964(c), it must be somehow different in kind from the direct injury resulting from the predicate acts of racketeering activity. It found no allegation here of any injury apart from that which would result directly from the alleged predicate acts of mail fraud and wire fraud. Accordingly, it dismissed the RICO counts for failure to state a claim. A divided panel of the Court of Appeals for the Second Circuit affirmed. After a lengthy review of the legislative history, the Court of Appeals held that Sedima's complaint was defective in two ways. It failed to allege an injury "by reason of a violation of section 1962." It also failed to allege that the defendants had already been criminally convicted of the predicate acts of mail and wire fraud, or of a RICO violation. In light of the variety of approaches taken by the lower courts and the importance of the issues, the Supreme Court granted certiorari.
View caseA federal corporation sold restored land and used the amount received after transaction costs to finance additional cleanups. The court considered whether a state fee applied to those funds when the corporation conducted the sales.
During the Civil War, Y. F. Wilson owned cotton in an insurgent state that came into the possession of agents of the Treasury Department as captured or abandoned property under the Abandoned and Captured Property Act of March 12, 1863. The agents sold the cotton and paid the proceeds into the Treasury of the United States. He took, and has not violated, the amnesty oath under the President’s proclamation. Wilson died, and Klein, as administrator of his estate, filed suit in the Court of Claims seeking recovery of the net proceeds from the cotton. On May 26, 1869, the Court of Claims rendered judgment in favor of the administrator. The United States appealed, and the appeal was filed in the Supreme Court on December 11, 1869. In the related case of United States v. Padelford, which presented similar facts involving captured and abandoned property and a presidential pardon, the Supreme Court affirmed the Court of Claims judgment on April 30, 1870. Congress then passed the appropriation act of July 12, 1870, containing a proviso that addressed suits for proceeds of abandoned and captured property pending in the Court of Claims and on appeal to the Supreme Court.
View caseUnder UCC § 2-709(2) the seller must credit the buyer with the amount received on resale after deducting resale expenses. Payment of the judgment then entitles the buyer to any goods that remain unsold.
Supporting sources
Black's Law Dictionary defines net proceeds as the amount received minus transaction costs such as expenses and commissions.
When a spouse sells premarital separate property and uses the entire net proceeds as a down payment on a new asset, the traceable portion remains that spouse's individual property under statutes that protect property acquired in exchange for individual assets.
Supporting sources
…the state is operating the railroad without profit, for the purpose of facilitating the commerce of the port, and is using the net proceeds of operation for harbor improvement, . . . it is engaged in performing a public function in its sovereign capacity and for that reason cannot constitutionally be subjected to the provisions…