§1341 — Computation of tax where taxpayer restores substantial amount held under claim of right
279 citing cases
Statute Text — 26 U.S.C. §1341
If—
an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item;
a deduction is allowable for the taxable year because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item or to a portion of such item; and
the amount of such deduction exceeds $3,000,
the tax for the taxable year computed with such deduction; or
an amount equal to—
the tax for the taxable year computed without such deduction, minus
the decrease in tax under this chapter (or the corresponding provisions of prior revenue laws) for the prior taxable year (or years) which would result solely from the exclusion of such item (or portion thereof) from gross income for such prior taxable year (or years).
then the tax imposed by this chapter for the taxable year shall be the lesser of the following:
If the decrease in tax ascertained under subsection (a)(5)(B) exceeds the tax imposed by this chapter for the taxable year (computed without the deduction) such excess shall be considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year, and shall be refunded or credited in the same manner as if it were an overpayment for such taxable year.
Subsection (a) does not apply to any deduction allowable with respect to an item which was included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer (or other property of a kind which would properly have been included in the inventory of the taxpayer if on hand at the close of the prior taxable year) or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. This paragraph shall not apply if the deduction arises out of refunds or repayments with respect to rates made by a regulated public utility (as defined in section 7701(a)(33) without regard to the limitation contained in the last two sentences thereof) if such refunds or repayments are required to be made by the Government, political subdivision, agency, or instrumentality referred to in such section, or by an order of a court, or are made in settlement of litigation or under threat or imminence of litigation.
If the tax imposed by this chapter for the taxable year is the amount determined under subsection (a)(5), then the deduction referred to in subsection (a)(2) shall not be taken into account for any purpose of this subtitle other than this section.
For purposes of determining whether paragraph (4) or paragraph (5) of subsection (a) applies—
in any case where the deduction referred to in paragraph (4) of subsection (a) results in a net operating loss, such loss shall, for purposes of computing the tax for the taxable year under such paragraph (4), be carried back to the same extent and in the same manner as is provided under section 172; and
in any case where the exclusion referred to in paragraph (5)(B) of subsection (a) results in a net operating loss or capital loss for the prior taxable year (or years), such loss shall, for purposes of computing the decrease in tax for the prior taxable year (or years) under such paragraph (5) (B), be carried back and carried over to the same extent and in the same manner as is provided under section 172 or section 1212, except that no carryover beyond the taxable year shall be taken into account.
For purposes of this chapter, the net operating loss described in paragraph (4)(A) of this subsection, or the net operating loss or capital loss described in paragraph (4)(B) of this subsection, as the case may be, shall (after the application of paragraph (4) or (5)(B) of subsection (a) for the taxable year) be taken into account under section 172 or 1212 for taxable years after the taxable year to the same extent and in the same manner as—
a net operating loss sustained for the taxable year, if paragraph (4) of subsection (a) applied, or
a net operating loss or capital loss sustained for the prior taxable year (or years), if paragraph (5)(B) of subsection (a) applied.
Treasury Regulations
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Treas. Reg. §1.1341-1Restoration of amounts received or accrued under claim of right
(a) In general. (1) If, during the taxable year, the taxpayer is entitled under other provisions of chapter 1 of the Internal Revenue Code of 1954 to a deduction of more than $3,000 because of the restoration to another of an item which was included in the taxpayer's gross income for a prior taxable year (or years) under a claim of right, the tax imposed by chapter 1 of the Internal Revenue Code of 1954 for the taxable year shall be the tax provided in paragraph (b) of this section.
(2) For the purpose of this section income included under a claim of right means an item included in gross income because it appeared from all the facts available in the year of inclusion that the taxpayer had an unrestricted right to such item, and restoration to another means a restoration resulting because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item (or portion thereof).
(3) For purposes of determining whether the amount of a deduction described in section 1341(a)(2) exceeds $3,000 for the taxable year, there shall be taken into account the aggregate of all such deductions with respect to each item of income (described in section 1341(a)(1)) of the same class.
(b) Determination of tax. (1) Under the circumstances described in paragraph (a) of this section, the tax imposed by chapter 1 of the Internal Revenue Code of 1954 for the taxable year shall be the lesser of:
(i) The tax for the taxable year computed under section 1341(a)(4), that is, with the deduction taken into account, or
(ii) The tax for the taxable year computed under section 1341(a)(5), that is, without taking such deduction into account, minus the decrease in tax (net of any increase in tax imposed by section 56, relating to the minimum tax for tax preferences) (under chapter 1 of the Internal Revenue Code of 1954, under chapter 1 (other than subchapter E) and subchapter E of chapter 2 of the Internal Revenue Code of 1939, or under the corresponding provisions of prior revenue laws) for the prior taxable year (or years) which would result solely from the exclusion from gross income of all or that portion of the income included under a claim of right to which the deduction is attributable. For the purpose of this subdivision, the amount of the decrease in tax is not limited to the amount of the tax for the taxable year. See paragraph (i) of this section where the decrease in tax for the prior taxable year (or years) exceeds the tax for the taxable year.
(iii) For purposes of computing, under section 1341(a)(4) and subdivision (i) of this subparagraph, the tax for a taxable year beginning after December 31, 1961, if the deduction of the amount of the restoration results in a net operating loss for the taxable year of restoration, such net operating loss shall, pursuant to section 1341(b)(4)(A), be carried back to the same extent and in the same manner as is provided under section 172 (relating to the net operating loss deduction) and the regulations thereunder. If the aggregate decrease in tax for the taxable year (or years) to which such net operating loss is carried back is greater than the excess of:
(a) The amount of decrease in tax for a prior taxable year (or years) computed under section 1341(a)(5)(B), over
(b) The tax for the taxable year computed under section 1341(a)(5)(A),
The tax imposed for the taxable year under chapter 1 shall be the tax determined under section 1341(a)(4) and subdivision (i) of this subparagraph. If the tax imposed for the taxable year is determined under section 1341(a)(4) and subdivision (i) of this subparagraph, the decrease in tax for the taxable year (or years) to which the net operating loss is carried back shall be an overpayment of tax for the taxable year (or years) to which the net operating loss is carried back and shall be refunded or credited as an overpayment for such taxable year (or years). See section 6511(d)(2), relating to special period of limitation with respect to net operating loss carrybacks.
(2) Except as otherwise provided in section 1341(b)(4)(B) and paragraph (d) (1)(ii) and (4)(ii) of this section, if the taxpayer computes his tax for the taxable year under the provisions of section 1341(a)(5) and subparagraph (1)(ii) of this paragraph, the amount of the restoration shall not be taken into account in computing taxable income or loss for the taxable year, including the computation of any net operating loss carryback or carryover or any capital loss carryover. However, the amount of such restoration shall be taken into account in adjusting earnings and profits for the current taxable year.
(3) If the tax determined under subparagraph (1)(i) of this paragraph is the same as the tax determined under subparagraph (1)(ii) of this paragraph, the tax imposed for the taxable year under chapter 1 shall be the tax determined under subparagraph (1)(i) of this paragraph, and section 1341 and this section shall not otherwise apply.
(4) After it has been determined whether the tax imposed for a taxable year of restoration beginning after December 31, 1961, shall be computed under the provisions of section 1341(a)(4) or under the provisions of section 1341(a)(5), the net operating loss, if any, which remains after the application of section 1341(b)(4)(A) or the net operating loss or capital loss, if any, which remains after the application of section 1341(b)(4)(B) shall be taken into account in accordance with the following rules:
(i) If it is determined that section 1341(a)(4) and subparagraph (1)(i) of this paragraph apply, then that portion, if any, of the net operating loss for the taxable year which remains after the application of section 1341(b)(4)(A) and subparagraph (1)(iii) of this paragraph shall be taken into account under section 172 for taxable years subsequent to the taxable year of restoration to the same extent and in the same manner as a net operating loss sustained in such taxable year of restoration. Thus, if the net operating loss for the taxable year of restoration (computed with the deduction referred to in section 1341(a)(4)) exceeds the taxable income (computed with the modifications prescribed in section 172) for the taxable year (or years) to which it is carried back, such excess shall be available as a carryover to taxable years subsequent to the taxable year of restoration.
(ii) If it is determined that section 1341(a)(5) and subparagraph (1)(ii) of this paragraph apply, then that portion, if any, of a net operating loss or capital loss which remains after the application of section 1341(b)(4)(B) and paragraph (d)(4) of this section shall be taken into account under section 172 or 1212, as the case may be, for taxable years subsequent to the taxable year of restoration to the same extent and in the same manner as a net operating loss or capital loss sustained in the prior taxable year (or years). For example, if the net operating loss for the prior taxable year (computed with the exclusion referred to in section 1341(a)(5)(B)) exceeds the taxable income (computed with the modifications prescribed in section 172) for prior taxable years to which such net operating loss is carried back or carried over (including for this purpose the taxable year of restoration), such excess shall be available as a carryover to taxable years subsequent to the taxable year of restoration in accordance with the rules prescribed in section 172 which are applicable to such prior taxable year (or years).
(c) Application to deductions which are capital in nature. Section 1341 and this section shall also apply to a deduction which is capital in nature otherwise allowable in the taxable year. If the deduction otherwise allowable is capital in nature, the determination of whether the taxpayer is entitled to the benefits of section 1341 and this section shall be made without regard to the net capital loss limitation imposed by section 1211. For example, if a taxpayer restores $4,000 in the taxable year and such amount is a long-term capital loss, the taxpayer will, nevertheless, be considered to have met the $3,000 deduction requirement for purposes of applying this section, although the full amount of the loss might not be allowable as a deduction for the taxable year. However, if the tax for the taxable year is computed with the deduction taken into account, the deduction allowable will be subject to the limitation on capital losses provided in section 1211, and the capital loss carryover provided in section 1212.
(d) Determination of decrease in tax for prior taxable years—(1) Prior taxable years. (i) Except as otherwise provided in subdivision (ii) of this subparagraph, the prior taxable year (or years) referred to in paragraph (b) of this section is the year (or years) in which the item to which the deduction is attributable was included in gross income under a claim of right and, in addition, any other prior taxable year (or years) the tax for which will be affected by the exclusion from gross income in such prior taxable year (or years) of such income.
(ii) For purposes of applying section 1341(b)(4)(B) in computing the amount of the decrease referred to in paragraph (b)(1)(ii) of this section for any taxable year beginning after December 31, 1961, the term prior taxable year (or years) includes the taxable year of restoration. Under section 1341(b)(4)(B), for taxable years of restoration beginning after December 31, 1961, in any case where the exclusion referred to in section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section results in a net operating loss or capital loss for the prior taxable year (or years), such loss shall, for purposes of computing the decrease in tax for the prior taxable year (or years) under such section 1341(a)(5)(B) and such paragraph (b)(1)(ii) of this section, be carried back and carried over to the same extent and in the same manner as is provided under section 172 (relating to the net operating loss deduction) or section 1212 (relating to capital loss carryover), except that no carryover beyond the taxable year shall be taken into account. See subparagraph (4) of this paragraph for rules relating to the computation of the amount of decrease in tax.
(2) Amount of exclusion from gross income in prior taxable years. (i) The amount to be excluded from gross income for the prior taxable year (or years) in determining the decrease in tax under section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section shall be the amount restored in the taxable year, but shall not exceed the amount included in gross income in the prior taxable year (or years) under the claim of right to which the deduction for the restoration is attributable, and shall be adjusted as provided in subdivision (ii) of this subparagraph.
(ii) If the amount included in gross income for the prior taxable year (or years) under the claim of right in question was reduced in such year (or years) by a deduction allowed under section 1202 (or section 117 (b) of the Internal Revenue Code of 1939 or corresponding provisions of prior revenue laws), then the amount determined under subdivision (i) of this subparagraph to be excluded from gross income for such year (or years) shall be reduced in the same proportion that the amount included in gross income under a claim of right was reduced.
(iii) The determination of the amount of the exclusion from gross income of the prior taxable year shall be made without regard to the capital loss limitation contained in section 1211 applicable in computing taxable income for the current taxable year. The amount of the exclusion from gross income in a prior taxable year (or years) shall not exceed the amount which would, but for the application of section 1211, be allowable as a deduction in the taxable year of restoration.
(iv) The rule provided in subdivision (iii) of this subparagraph may be illustrated as follows:
(3) Determination of amount of deduction attributable to prior taxable years. (i) If the deduction otherwise allowable for the taxable year relates to income included in gross income under a claim of right in more than one prior taxable year and the amount attributable to each such prior taxable year cannot be readily identified, then the portion attributable to each such prior taxable year shall be that proportion of the deduction otherwise allowable for the taxable year which the amount of the income included under the claim of right in question for the prior taxable year bears to the total of all such income included under the claim of right for all such prior taxable years.
(ii) The rule provided in subdivision (i) of this subparagraph may be illustrated as follows:
(4) Computation of amount of decrease in tax. (i) In computing the amount of decrease in tax for a prior taxable year (or years) resulting from the exclusion from gross income of the income included under a claim of right, there must first be ascertained the amount of tax previously determined for the taxpayer for such prior taxable year (or years). The tax previously determined shall be the sum of the amounts shown by the taxpayer on his return or returns, plus any amounts which have been previously assessed (or collected without assessment) as deficiencies or which appropriately should be assessed or collected, reduced by the amount of any refunds or credits which have previously been made or which appropriately should be made. For taxable years beginning after December 31, 1961, if the provisions of section 1341(b)(4)(B) are applicable, the tax previously determined shall include the tax for the taxable year of restoration computed without taking the deduction for the amount of the restoration into account. After the tax previously determined has been ascertained, a recomputation must then be made to determine the decrease in tax, if any, resulting from the exclusion from gross income of all or that portion of the income included under a claim of right to which the deduction otherwise allowable in the taxable year is attributable.
(ii) No item other than the exclusion of the income previously included under a claim of right shall be considered in computing the amount of decrease in tax if reconsideration of such other item is prevented by the operation of any provision of the internal revenue laws or any other rule of law. However, if the amounts of other items in the return are dependent upon the amount of adjusted gross income, taxable income, or net income (such as charitable contributions, foreign tax credit, deductions for depletion, and net operating loss), appropriate adjustment shall be made as part of the computation of the decrease in tax. For the purpose of determining the decrease in tax for the prior taxable year (or years) which would result from the exclusion from gross income of the item included under a claim of right, the exclusion of such item shall be given effect not only in the prior taxable year in which it was included in gross income but in all other prior taxable years (including the taxable year of restoration if such year begins after December 31, 1961, and section 1341(b)(4)(B) applies, see subparagraph (1)(ii) of this paragraph) affected by the inclusion of the item (for example, prior taxable years affected by a net operating loss carryback or carryover or capital loss carryover).
(iii) The rules provided in this subparagraph may be illustrated as follows:
(e) Method of accounting. The provisions of section 1341 and this section shall be applicable in the case of a taxpayer on the cash receipts and disbursements method of accounting only to the taxable year in which the item of income included in a prior year (or years) under a claim of right is actually repaid. However, in the case of a taxpayer on the cash receipts and disbursements method of accounting who constructively received an item of income under a claim of right and included such item of income in gross income in a prior year (or years), the provisions of section 1341 and this section shall be applicable to the taxable year in which the taxpayer is required to relinquish his right to receive such item of income. Such provisions shall be applicable in the case of other taxpayers only to the taxable year which is the proper taxable year (under the method of accounting used by the taxpayer in computing taxable income) for taking into account the deduction resulting from the restoration of the item of income included in a prior year (or years) under a claim of right. For example, if the taxpayer is on an accrual method of accounting, the provisions of this section shall apply to the year in which the obligation properly accrues for the repayment of the item included under a claim of right.
(f) Inventory items, stock in trade, and property held primarily for sale in the ordinary course of trade or business. (1) Except for amounts specified in subparagraphs (2) and (3) of this paragraph, the provisions of section 1341 and this section do not apply to deductions attributable to items which were included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer (or other property of a kind which would properly have been included in the inventory of the taxpayer if on hand at the close of the prior taxable year) or property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business. This section is, therefore, not applicable to sales returns and allowances and similar items.
(2)(i) In the case of taxable years beginning after December 31, 1957, the provisions of section 1341 and this section apply to deductions which arise out of refunds or repayments with respect to rates made by a regulated public utility, as defined in section 7701(a)(33) without regard to the limitation contained in the last two sentences thereof (for taxable years beginning before January 1, 1964, as defined in section 1503(c) (1) or (3) and paragraph (g) of § 1.1502-2A (as contained in the 26 CFR edition revised as of April 1, 1996)), if such refunds or repayments are required to be made by the Government, political subdivision, agency, or instrumentality referred to in such section, or are required to be made by an order of a court, or are made in settlement of litigation or under threat or imminence of litigation. Thus, deductions attributable to refunds of charges for the sale of natural gas under rates approved temporarily by a proper governmental authority are, in the case of taxable years beginning after December 31, 1957, eligible for the benefits of section 1341 and this section, if such refunds are required by the governmental authority, or by an order of a court, or are made in settlement of litigation or under threat or imminence of litigation.
(ii) In the case of taxable years beginning before January 1, 1958, the provisions of section 1341 and this section apply to deductions which arise out of refunds or repayments (whether or not with respect to rates) made by a regulated public utility, as defined in section 7701(a)(33) without regard to the limitation contained in the last two sentences thereof (for taxable years beginning before January 1, 1964, as defined in section 1503(c) (1) or (3) and paragraph (g) of § 1.1502-2A), if such refunds or repayments are required to be made by the Government, political subdivision, agency, or instrumentality referred to in such section. Thus, in the case of taxable years beginning before January 1, 1958, deductions attributable to refunds or repayments may be eligible for the benefits of section 1341 and this section, even though such refunds or repayments are not with respect to rates. On the other hand, in the case of such taxable years, section 1341 and this section do not apply to any deduction which arises out of a refund or repayment (whether or not with respect to rates) which is required to be made by an order of a court, or which is made in settlement of litigation or under threat or imminence of litigation.
(3) The provisions of section 1341 and this section apply to a deduction which arises out of a payment or repayment made pursuant to a price redetermination provision in a subcontract:
(i) If such subcontract was entered into before January 1, 1958, between persons other than those bearing a relationship set forth in section 267(b);
(ii) If such subcontract is subject to statutory renegotiation; and
(iii) If section 1481 (relating to mitigation of effect of renegotiation of Government contracts) does not apply to such payment or repayment solely because such payment or repayment is not paid or repaid to the United States or any agency thereof.
Thus, a taxpayer who enters into a subcontract to furnish items to a prime contractor with the United States may, pursuant to a price redetermination provision in the subcontract, be required to refund an amount to the prime contractor or to another subcontractor. Since the refund would be made directly to the prime contractor or to another subcontractor, and not directly to the United States, the taxpayer would be unable to avail himself of the benefits of section 1481. However, the provisions of section 1341 and this section will apply in such a case, if the conditions set forth in subdivisions (i), (ii), and (iii) of this subparagraph are met. For provisions relating to the mitigation of the effect of a redetermination of price with respect to subcontracts entered into after December 31, 1957, when repayment is made to a party other than the United States or any agency thereof, see section 1482.
(g) Bad debts. The provisions of sections 1341 and this section do not apply to deductions attributable to bad debts.
(h) Legal fees and other expenses. Section 1341 and this section do not apply to legal fees or other expenses incurred by a taxpayer in contesting the restoration of an item previously included in income. This rule may be illustrated by the following example:
(i) Refunds. If the decrease in tax for the prior taxable year (or years) determined under section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section exceeds the tax imposed by chapter 1 of the Code for the taxable year computed without the deduction, and for taxable years beginning after December 31, 1961, if such excess is greater than the decrease in tax for the taxable year (or years) to which the net operating loss described in section 1341(b)(4)(A) and paragraph (b)(1)(iii) of this section is carried back, such excess shall be considered to be a payment of tax for the taxable year of restoration. Such payment is deemed to have been made on the last day prescribed by law for the payment of tax for the taxable year and shall be refunded or credited in the same manner as if it were an overpayment of tax for such taxable year. However, no interest shall be allowed or paid if such an excess results from the application of section 1341(a)(5)(B) in the case of a deduction described in paragraph (f)(3) of this section (relating to payments or repayments pursuant to price redetermination). If the tax for the taxable year of restoration is computed under section 1341(a)(4) and results in a decrease in tax for the taxable year (or years) to which a net operating loss described in section 1341(b)(4)(A) is carried back, see paragraph (b)(1)(iii) of this section.
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Treas. Reg. §1.1341-1(a)§1.1341-1(a)
The amount of decrease in tax for a prior taxable year (or years) computed under section 1341(a)(5)(B), over
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Treas. Reg. §1.1341-1(b)§1.1341-1(b)
The tax for the taxable year computed under section 1341(a)(5)(A),
The tax imposed for the taxable year under chapter 1 shall be the tax determined under section 1341(a)(4) and subdivision (i) of this subparagraph. If the tax imposed for the taxable year is determined under section 1341(a)(4) and subdivision (i) of this subparagraph, the decrease in tax for the taxable year (or years) to which the net operating loss is carried back shall be an overpayment of tax for the taxable year (or years) to which the net operating loss is carried back and shall be refunded or credited as an overpayment for such taxable year (or years). See section 6511(d)(2), relating to special period of limitation with respect to net operating loss carrybacks.
(2) Except as otherwise provided in section 1341(b)(4)(B) and paragraph (d) (1)(ii) and (4)(ii) of this section, if the taxpayer computes his tax for the taxable year under the provisions of section 1341(a)(5) and subparagraph (1)(ii) of this paragraph, the amount of the restoration shall not be taken into account in computing taxable income or loss for the taxable year, including the computation of any net operating loss carryback or carryover or any capital loss carryover. However, the amount of such restoration shall be taken into account in adjusting earnings and profits for the current taxable year.
(3) If the tax determined under subparagraph (1)(i) of this paragraph is the same as the tax determined under subparagraph (1)(ii) of this paragraph, the tax imposed for the taxable year under chapter 1 shall be the tax determined under subparagraph (1)(i) of this paragraph, and section 1341 and this section shall not otherwise apply.
(4) After it has been determined whether the tax imposed for a taxable year of restoration beginning after December 31, 1961, shall be computed under the provisions of section 1341(a)(4) or under the provisions of section 1341(a)(5), the net operating loss, if any, which remains after the application of section 1341(b)(4)(A) or the net operating loss or capital loss, if any, which remains after the application of section 1341(b)(4)(B) shall be taken into account in accordance with the following rules:
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Treas. Reg. §1.1341-1(c)Application to deductions which are capital in nature.
Application to deductions which are capital in nature. Section 1341 and this section shall also apply to a deduction which is capital in nature otherwise allowable in the taxable year. If the deduction otherwise allowable is capital in nature, the determination of whether the taxpayer is entitled to the benefits of section 1341 and this section shall be made without regard to the net capital loss limitation imposed by section 1211. For example, if a taxpayer restores $4,000 in the taxable year and such amount is a long-term capital loss, the taxpayer will, nevertheless, be considered to have met the $3,000 deduction requirement for purposes of applying this section, although the full amount of the loss might not be allowable as a deduction for the taxable year. However, if the tax for the taxable year is computed with the deduction taken into account, the deduction allowable will be subject to the limitation on capital losses provided in section 1211, and the capital loss carryover provided in section 1212.
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Treas. Reg. §1.1341-1(d)Determination of decrease in tax for prior taxable years—(1) Prior taxable years.
Determination of decrease in tax for prior taxable years—(1) Prior taxable years. (i) Except as otherwise provided in subdivision (ii) of this subparagraph, the prior taxable year (or years) referred to in paragraph (b) of this section is the year (or years) in which the item to which the deduction is attributable was included in gross income under a claim of right and, in addition, any other prior taxable year (or years) the tax for which will be affected by the exclusion from gross income in such prior taxable year (or years) of such income.
(ii) For purposes of applying section 1341(b)(4)(B) in computing the amount of the decrease referred to in paragraph (b)(1)(ii) of this section for any taxable year beginning after December 31, 1961, the term prior taxable year (or years) includes the taxable year of restoration. Under section 1341(b)(4)(B), for taxable years of restoration beginning after December 31, 1961, in any case where the exclusion referred to in section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section results in a net operating loss or capital loss for the prior taxable year (or years), such loss shall, for purposes of computing the decrease in tax for the prior taxable year (or years) under such section 1341(a)(5)(B) and such paragraph (b)(1)(ii) of this section, be carried back and carried over to the same extent and in the same manner as is provided under section 172 (relating to the net operating loss deduction) or section 1212 (relating to capital loss carryover), except that no carryover beyond the taxable year shall be taken into account. See subparagraph (4) of this paragraph for rules relating to the computation of the amount of decrease in tax.
(2) Amount of exclusion from gross income in prior taxable years. (i) The amount to be excluded from gross income for the prior taxable year (or years) in determining the decrease in tax under section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section shall be the amount restored in the taxable year, but shall not exceed the amount included in gross income in the prior taxable year (or years) under the claim of right to which the deduction for the restoration is attributable, and shall be adjusted as provided in subdivision (ii) of this subparagraph.
(ii) If the amount included in gross income for the prior taxable year (or years) under the claim of right in question was reduced in such year (or years) by a deduction allowed under section 1202 (or section 117 (b) of the Internal Revenue Code of 1939 or corresponding provisions of prior revenue laws), then the amount determined under subdivision (i) of this subparagraph to be excluded from gross income for such year (or years) shall be reduced in the same proportion that the amount included in gross income under a claim of right was reduced.
(iii) The determination of the amount of the exclusion from gross income of the prior taxable year shall be made without regard to the capital loss limitation contained in section 1211 applicable in computing taxable income for the current taxable year. The amount of the exclusion from gross income in a prior taxable year (or years) shall not exceed the amount which would, but for the application of section 1211, be allowable as a deduction in the taxable year of restoration.
(iv) The rule provided in subdivision (iii) of this subparagraph may be illustrated as follows:
(3) Determination of amount of deduction attributable to prior taxable years. (i) If the deduction otherwise allowable for the taxable year relates to income included in gross income under a claim of right in more than one prior taxable year and the amount attributable to each such prior taxable year cannot be readily identified, then the portion attributable to each such prior taxable year shall be that proportion of the deduction otherwise allowable for the taxable year which the amount of the income included under the claim of right in question for the prior taxable year bears to the total of all such income included under the claim of right for all such prior taxable years.
(ii) The rule provided in subdivision (i) of this subparagraph may be illustrated as follows:
(4) Computation of amount of decrease in tax. (i) In computing the amount of decrease in tax for a prior taxable year (or years) resulting from the exclusion from gross income of the income included under a claim of right, there must first be ascertained the amount of tax previously determined for the taxpayer for such prior taxable year (or years). The tax previously determined shall be the sum of the amounts shown by the taxpayer on his return or returns, plus any amounts which have been previously assessed (or collected without assessment) as deficiencies or which appropriately should be assessed or collected, reduced by the amount of any refunds or credits which have previously been made or which appropriately should be made. For taxable years beginning after December 31, 1961, if the provisions of section 1341(b)(4)(B) are applicable, the tax previously determined shall include the tax for the taxable year of restoration computed without taking the deduction for the amount of the restoration into account. After the tax previously determined has been ascertained, a recomputation must then be made to determine the decrease in tax, if any, resulting from the exclusion from gross income of all or that portion of the income included under a claim of right to which the deduction otherwise allowable in the taxable year is attributable.
(ii) No item other than the exclusion of the income previously included under a claim of right shall be considered in computing the amount of decrease in tax if reconsideration of such other item is prevented by the operation of any provision of the internal revenue laws or any other rule of law. However, if the amounts of other items in the return are dependent upon the amount of adjusted gross income, taxable income, or net income (such as charitable contributions, foreign tax credit, deductions for depletion, and net operating loss), appropriate adjustment shall be made as part of the computation of the decrease in tax. For the purpose of determining the decrease in tax for the prior taxable year (or years) which would result from the exclusion from gross income of the item included under a claim of right, the exclusion of such item shall be given effect not only in the prior taxable year in which it was included in gross income but in all other prior taxable years (including the taxable year of restoration if such year begins after December 31, 1961, and section 1341(b)(4)(B) applies, see subparagraph (1)(ii) of this paragraph) affected by the inclusion of the item (for example, prior taxable years affected by a net operating loss carryback or carryover or capital loss carryover).
(iii) The rules provided in this subparagraph may be illustrated as follows:
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Treas. Reg. §1.1341-1(e)Method of accounting.
Method of accounting. The provisions of section 1341 and this section shall be applicable in the case of a taxpayer on the cash receipts and disbursements method of accounting only to the taxable year in which the item of income included in a prior year (or years) under a claim of right is actually repaid. However, in the case of a taxpayer on the cash receipts and disbursements method of accounting who constructively received an item of income under a claim of right and included such item of income in gross income in a prior year (or years), the provisions of section 1341 and this section shall be applicable to the taxable year in which the taxpayer is required to relinquish his right to receive such item of income. Such provisions shall be applicable in the case of other taxpayers only to the taxable year which is the proper taxable year (under the method of accounting used by the taxpayer in computing taxable income) for taking into account the deduction resulting from the restoration of the item of income included in a prior year (or years) under a claim of right. For example, if the taxpayer is on an accrual method of accounting, the provisions of this section shall apply to the year in which the obligation properly accrues for the repayment of the item included under a claim of right.
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Treas. Reg. §1.1341-1(f)Inventory items, stock in trade, and property held primarily for sale in the ordinary course of trade or business.
Inventory items, stock in trade, and property held primarily for sale in the ordinary course of trade or business. (1) Except for amounts specified in subparagraphs (2) and (3) of this paragraph, the provisions of section 1341 and this section do not apply to deductions attributable to items which were included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer (or other property of a kind which would properly have been included in the inventory of the taxpayer if on hand at the close of the prior taxable year) or property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business. This section is, therefore, not applicable to sales returns and allowances and similar items.
(2)(i) In the case of taxable years beginning after December 31, 1957, the provisions of section 1341 and this section apply to deductions which arise out of refunds or repayments with respect to rates made by a regulated public utility, as defined in section 7701(a)(33) without regard to the limitation contained in the last two sentences thereof (for taxable years beginning before January 1, 1964, as defined in section 1503(c) (1) or (3) and paragraph (g) of § 1.1502-2A (as contained in the 26 CFR edition revised as of April 1, 1996)), if such refunds or repayments are required to be made by the Government, political subdivision, agency, or instrumentality referred to in such section, or are required to be made by an order of a court, or are made in settlement of litigation or under threat or imminence of litigation. Thus, deductions attributable to refunds of charges for the sale of natural gas under rates approved temporarily by a proper governmental authority are, in the case of taxable years beginning after December 31, 1957, eligible for the benefits of section 1341 and this section, if such refunds are required by the governmental authority, or by an order of a court, or are made in settlement of litigation or under threat or imminence of litigation.
(ii) In the case of taxable years beginning before January 1, 1958, the provisions of section 1341 and this section apply to deductions which arise out of refunds or repayments (whether or not with respect to rates) made by a regulated public utility, as defined in section 7701(a)(33) without regard to the limitation contained in the last two sentences thereof (for taxable years beginning before January 1, 1964, as defined in section 1503(c) (1) or (3) and paragraph (g) of § 1.1502-2A), if such refunds or repayments are required to be made by the Government, political subdivision, agency, or instrumentality referred to in such section. Thus, in the case of taxable years beginning before January 1, 1958, deductions attributable to refunds or repayments may be eligible for the benefits of section 1341 and this section, even though such refunds or repayments are not with respect to rates. On the other hand, in the case of such taxable years, section 1341 and this section do not apply to any deduction which arises out of a refund or repayment (whether or not with respect to rates) which is required to be made by an order of a court, or which is made in settlement of litigation or under threat or imminence of litigation.
(3) The provisions of section 1341 and this section apply to a deduction which arises out of a payment or repayment made pursuant to a price redetermination provision in a subcontract:
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Treas. Reg. §1.1341-1(g)Bad debts.
Bad debts. The provisions of sections 1341 and this section do not apply to deductions attributable to bad debts.
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Treas. Reg. §1.1341-1(h)Legal fees and other expenses.
Legal fees and other expenses. Section 1341 and this section do not apply to legal fees or other expenses incurred by a taxpayer in contesting the restoration of an item previously included in income. This rule may be illustrated by the following example:
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Treas. Reg. §1.1341-1(i)Refunds.
Refunds. If the decrease in tax for the prior taxable year (or years) determined under section 1341(a)(5)(B) and paragraph (b)(1)(ii) of this section exceeds the tax imposed by chapter 1 of the Code for the taxable year computed without the deduction, and for taxable years beginning after December 31, 1961, if such excess is greater than the decrease in tax for the taxable year (or years) to which the net operating loss described in section 1341(b)(4)(A) and paragraph (b)(1)(iii) of this section is carried back, such excess shall be considered to be a payment of tax for the taxable year of restoration. Such payment is deemed to have been made on the last day prescribed by law for the payment of tax for the taxable year and shall be refunded or credited in the same manner as if it were an overpayment of tax for such taxable year. However, no interest shall be allowed or paid if such an excess results from the application of section 1341(a)(5)(B) in the case of a deduction described in paragraph (f)(3) of this section (relating to payments or repayments pursuant to price redetermination). If the tax for the taxable year of restoration is computed under section 1341(a)(4) and results in a decrease in tax for the taxable year (or years) to which a net operating loss described in section 1341(b)(4)(A) is carried back, see paragraph (b)(1)(iii) of this section.
279 Citing Cases
Section 1341 applies if (1) “an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item,” I.R.C.
n. 3 [*3] After a further exchange of communications with petitioner, the IRS issued him a Notice of Deficiency dated March 15, 2023. The notice disallowed the $46,908 credit, concluding that he had not substantiated an entitlement to relief under section 1341. The notice determined a tax deficiency of $12,507 and an accuracy-related penalty of $2,501 (subsequently conceded). Previous communications between petitioner and the IRS appear to indicate that the remainder of the offset he claimed—$34
§ 1341, and making and subscribing a false tax return for 2003 in violation of section 7206(1). On May 16, 2008, petitioner pleaded guilty to one count of mail fraud and to the false-tax-return count for 2003. Before his guilty plea, on May 13, 2008, petitioner signed a plea agreement and a supporting statement of facts (together, plea agreement) s
9 If in a subsequent refund action petitioners are denied relief under section 1341, an equitable recoupment claim may then become available (so long as they meet the relevant requirements). See Estate of Stein, 37 T.C. at 956 n.10 (stating that “District Courts have permitted equitable recoupment” if section 1341 does not apply).
Claim of Right Section 1341 addresses instances in which a taxpayer includes an item in gross income for a prior taxable year because it appeared that the taxpayer had an unrestricted right to the item of income. A deduction is allowed after the close of the prior taxable year if it is established that the taxpayer did not have an unrestricted right to that item. § 1341(a). Pursuant to section 1341 a taxpayer may be eligible for a refund. For the purposes of section 1341, the original “circumsta
§ 1341.3 On July 16, 2013, after a jury trial, the U.S. District Court for the Southern District of New York entered a judgment of guilty as to each count set forth in profitability analyses, (4) updating a trading system for over-the-counter options on government securities for a large brokerage firm, (5) conducting statistical analyses, and (6) a
Section 1341 appears to provide a legal remedy for the problem that petitioners have identified. Section 1341 is captioned “Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right.” It applies where (1) “an item was included in gross income for a prior taxable year . . . because it appeared that the taxpayer had an u
Section 1341 appears to provide a legal remedy for the problem that petitioners have identified. Section 1341 is captioned “Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right.” It applies where (1) “an item was included in gross income for a prior taxable year . . . because it appeared that the taxpayer had an u
1341; see also sec. 86(d)(2). Petitioner husband received Social Security benefits in 2014, and petitioners must include those benefits as income in their 2014 Form 1040 to the extent provided in section 86. Petitioners’ repayments in 2017 of benefits received in 2014 do not affect their 2014 tax liability. -8- C. Petitioners’ Other Arguments
The basis for petitioner's income tax evasion conviction was that during 2002 and 2003 he (1) operated a telemarketing business and used nominees, including corporate entities that he created and controlled, to conceal from the IRS his taxable income in the form ofcommissions from this business, (2) used the nominee entities to pa
process (CDP) hearing, petitioner abandoned his argument that the restitution payments he made constituted estimated tax payments. Instead, he argued that the restitution payments should have been reflected as credits against his tax for 2014 under section 1341. The Appeals Office rejected petitioner's argument and issued the notice ofdetermination, sustaining the proposed levy with respect to the unpaid income tax liability for 2014. Petitioner timely filed a petition seeking review ofthe noti
1341 with respect to a fraudulent check that he mailed on June 28, 1991. In that plea agreement, Mr. Garavaglia also pleaded guilty to conspiracy to defraud the U.S. Government under 18 U.S.C. sec. 371 with respect to a false corporate income tax return (i.e., Form 1120, U.S. Corporation Income Tax Return) that he filed on or about March 31, 1
income amounts received from the sale ofsome ofthose tax credits. As a result of SERVED Dec 28 2017 - 2 - [*2] litigation, Ps repaid some ofthose proceeds in subsequent tax years. Ps contend they are entitled to a 2007 taxable year deduction under I.R.C. sec. 1341 for repayment ofthe credit proceeds. IJe]4: R complied with the requirements ofI.R.C. sec. 6751(b). IIeld, further, the 40% accuracy-relatedpenalty for a gross valuation misstatement is sustained for tax years 2007 and 2008. I]eld, fu
1341; 3 counts ofwire fraud under 18 U.S.C. sec. 1343; 1 count offinancial institution money laundering under 18 U.S.C. sec. 1957; 2 counts offalse statements to a bank under 18 U.S.C. sec. 1014; 1 count oftheft ofhealthcare funds under 18 U.S.C. sec. 669; and 3 counts oftax evasion under section 7201. Count 20 ofthe indictment (for tax evasio
Section 1341 might have allowed him to adjust his tax for the year that he repaid Cigna, ifhe were entitled to a deduction in that tax year under another Code provision. See sec. 1341(a); see also Farahani v. Commissioner, T.C. Memo. 2014-111 (holding that the taxpayerwas not entitled to reliefbecause the taxpayer was not entitled to a deduction fo
1341 for knowingly causing to be delivered by mail a letter to Hadassah which included a material misrepresentation and an omission regarding - 7 - [*7] the distribution to the organization from Mrs. Hersh's adjusted gross estate. Count 2 ofthe information charged petitioner with violating section 7206(1) by filing a false Federal income tax
- 5 - ofOhio (1) overruled petitioner's objections to the report and recommendations of the Board ofCommissioners on Grievances and Discipline, (2) concluded that petitioner's Federal crimes involved moral turpitude, and (3) permanently disbarred him from the practice oflaw in Ohio.
, in part, stated: - 5 - [*5] 5) Affiants affirm that the $152,705.00 deduction claimed on line 27 ofthe attached U.S. Individual Income Tax Return Form 1040 Schedule A Itemized Deduction [sic] is a claim ofright adjustment founded on USC Title 26, § 1341. 6) Affiants make "the claim ofright" is as [sic] follows: a) The Affiants are claiming a natural right; b) the natural right is a right to make a living; c) The amount being claimed is a compensation for personal labor that was received as rep
655, 664 (1982) (quoting Wootton, "The Claim ofRight Doctrine and Section 1341", 34 Tax L.
In 1954 Congress enacted a statutoryremedy, section 1341, to alleviate some ofthe hardship ofthis rule.
1341 (2006); Black v. United States, 625 F.3d 386, 5A fourth Hollinger executive Mark S. Kipnis, was identified as a defendant in the superseding information. Mr. Kipnis has not filed a petition before.this Court. 6The Government indicted petitioner and Messrs. Black, Atkinson and Kipnis in a single charging document. For convenience, we will
Petitioners have failed to convince us that simply by including the claim of right deductions on their returns, they disclosed that the deductions they were claiming were clearly improper. Second, while the U.S. Court ofAppeals for the Eighth Circuit, to which an appeal in this case would lie absent a stipulation to the contrary, see sec
To the extent we hold that Mr.
1341 (2006); Black v. United States, 625 F.3d 386, 5A fourth Hollinger executive, Mark S. Kipnis, was identified as a defendant in the superseding information. Mr. Kipnis has not filed a petition before this Court. 6The Government indicted petitioner and Messrs. Black, Boultbee and Kipnis in a single charging document. For convenience, we will
To the extent we hold that Mr.
1341, conspiracy to defraud the United States in violation of 18 U.S.C. sec. 371, making and subscribing false individual and corporate income tax returns in violation of section 7206(1), and willful failure to file heavy vehicle use tax forms in violation of section 7203. The indictment also charged that Mr. Garavaglia's fraudulent activities
We now overrule the objection on the basis of relevance; however, we note that had these documents been denied admission, it would not have changed the result because petitioner failed to submit additional documentation to clarify whether the deductions had been included in gross distributions or had already been
The Cavarettas say the payments were deductible under section 162 as a business expense, or under section 165(c)(1) as a loss incurred in, a trade or business, or under section 1341 as a payment made under a claim of right .
Petitioners are thus'not entitled to the tax benefits of section 1341(a) . See, e .g ., Kraft v . United States , 991 F .2d 292, 299 (6th Cir . 1993) ("Furthermore, 26 U.S .C . § 1341 does not apply to a taxpayer who has embezzled or otherwise knowingly misappropriated funds which he is later required to return because the taxpayer never had an, unrestricted right to the money so obtained .") .
Petitioner made similar arguments, notably that his wages were not taxable under section 1341, on -i,s 2003 Form 1040 .
Whether petitioner is entitled to an alternative minimum tax (AMT) ordinary loss pursuant to section 1341 for stock forfeited under a lapse provision.
Petitioner's Federal Tax Returns For taxable years 1995 and 1996, petitioner timely filed self-prepared Forms 1040, U.S. Individual Income Tax Return. Petitioner reported gross income of $61,725 and $61,406 on his 1995 and 1996 tax returns, respectively. He reported none of the payments he had received from the Kieffers. (cid:16)04N2o
be sham, frivolous, or so unsubstantial that it would obviously be futile to try it . * * * We reject, however, petitioner's misguided view, reflected in his objection to respondent's motion for summary judgment, that he is entitled to relief under section 1341 . In certain circumstances, section 1341 may provide tax relief to a taxpayer who repays money in one year that had been included in gross income for a prior year under a claim of right . The relief provided under section 1341, however, a
Therefore, this example of accounting for tax consequences in valuing assets in an estate is distinguishable from the present valuation issue.
assets in the IRAs will never be transferred to a hypothetical buyer, we find that the reasoning of Estate of Davis v. Commissioner, supra, inapplicable to this case. B. Cases Where Future Tax Benefit Taken Into Account 1. Estate of Smith —Value of Sec. 1341 Deduction Taken Into Account in Valuing Claim Against Estate In Estate of Algerine Smith v. Commissioner, 198 F.3d 515 (5th Cir. 1999), revg. 108 T.C. 412 (1997), the Court of Appeals for the Fifth Circuit addressed whether to consider the i
[Citations omitted.] Although this doctrine has been applied “in a variety of contexts,” the situations have shared “a common factual element: the receipt of money or other property by a taxpayer with an imperfect right to retain it.” Wootton, “The Claim of Right Doctrine and Section 1341,” 34 Tax Law.
If a taxpayer is required to repay income recognized under the claim of right doctrine in an earlier tax year, section 1341 permits the taxpayer, in effect, to elect to compute his taxes for the year of repayment in a manner that gives the taxpayer the equivalent of a refund (without interest) of tax for the earlier year.
If a taxpayer is required to repay income recognized under the claim of right doctrine in an earlier tax year, section 1341 permits the taxpayer, in effect, to elect to compute his taxes for the year of repayment in a manner that gives the taxpayer the equivalent of a refund (without interest) of tax for the earlier year.
If a taxpayer is required to repay income recognized under the claim of right doctrine in an earlier tax year, section 1341 permits the taxpayer, in effect, to elect to compute his taxes for the year of repayment in a manner that gives the taxpayer the equivalent of a refund (without interest) of tax for the earlier year.
If a taxpayer is required to repay income recognized under the claim of right doctrine in an earlier tax year, section 1341 permits the taxpayer, in effect, to elect to compute his taxes for the year of repayment in a manner that gives the taxpayer the equivalent of a refund (without interest) of tax for the earlier year.
If a taxpayer is required to repay income recognized under the claim of right doctrine in an earlier tax year, section 1341 permits the taxpayer, in effect, to elect to compute his taxes for the year of repayment in a manner that gives the taxpayer the equivalent of a refund (without interest) of tax for the earlier year.
Section 1341 provides relief to a taxpayer who has received income under the claim of right doctrine and applies only if the amount of repayment exceeds $3,000 in the taxable year.
1341 (2000) and aiding and abetting under 18 U.S.C. sec. 2. Pursuant to the judgment imposed against Mr. Wilson in that criminal proceeding, the U.S. District Court ordered Mr. Wilson, inter alia, to pay restitution to certain insurance companies in the amount of $15,000. - 6 - Petitioners’ Fraud Penalty Accuracy-Related Penalty Year Deficien
After concessions by the parties, the issues for decision are: (1) Whether one of petitioner's subsidiaries is entitled to compute its tax liability for 1987 and 1988 pursuant to section 1341 and (2) whether funds overcollected pursuant to fuel and energy conservation cost recovery rates constitute income under section 61.
The court in Dominion Resources held that the return of excess deferred Federal income tax is a deductible expense, whereas, in WICOR, Inc., the court distinguished Dominion Resources and decided that a mere reduction of future utility rates did not constitute a deductible business expense. See also Florida Progress Corp. & Subs. v. Commissioner, 114 T.C. ___ (2000) (also filed this date). The use of the word “deduction” in section 1341(a)(2) limits section 1341 applicability to refunds or retur
attributable to gas costs from the unbilled - 2 - period as of Dec. 31, 1986. Held, further, P’s rate reductions from 1987 through 1990 to compensate for excess deferred Federal income tax are not deductible business expenses within the meaning of sec. 1341, and, therefore, P is not entitled to the beneficial treatment of sec. 1341. David E. Jacobson and Richard P. Swanson, for petitioner. Robert M. Morrison and J. Anthony Hoefer, for respondent. COHEN, Judge: Respondent determined the following
usly taken into gross income by Towers Construction under a claim of right when it received the advances from Key West Polo. Cf. sec. 1341(a)(1) (in computing tax where the taxpayer repays amounts held under claim of right, the remedial mechanism of sec. 1341 applies only if the item was included in gross income for prior years). - 40 - . liability to CB&T is a nondeductible contingent liability under section 461(f).3° We sustain respondent's determination on this issue. Issue 5. Additions to Ta
After concessions by the parties, the issues for decision are: (1) Whether one of petitioner’s subsidiaries is entitled to compute its tax liability for 1987 and 1988 pursuant to section 1341 and (2) whether funds overcollected pursuant to fuel and energy conservation cost recovery rates constitute income under section 61.
On February 27, 1996, petitioner pleaded guilty, admitting that no burglary had occurred and that his insurance claim was fraudulent. 7. Petitioner failed to report the illicit insurance recovery on his 1993 Federal income tax return. Respondent may carry his burden by means of facts that are treated as established in instances wh
1341A deals with terminations of multiemployer plans. The events that petitioner complains of do not constitute terminations within the meaning of 29 U.S.C. sec. 1341A. See Kershaw Multiemployer Plans--Special Rules, 359-3d, Tax Mgmt. (BNA), A-35 (1994). We hold, for respondent, that section 1.7476-1(b)(5), Income Tax Regs., does not apply to the instant case.
Under these circumstances, the court held section 1341 inapplicable because it was the corporation, rather than the taxpayer, who had previously reported the item being repaid.
1341, and four counts of embezzlement from employee pension funds in violation of 18 U.S.C. sec. 664. On May 10, 1989, he was sentenced to consecutive sentences totaling 30 years. He also was ordered to make restitution in the amount of - 17 - $12,903,250, less any recoveries made by the bankruptcy trustee. See infra. The Federal Bureau of In
ayments as business expenses under section 162 or section 165; (2) whether petitioner’s deductions or losses resulted in a net operating loss (NOL); (3) if petitioner is not entitled to an NOL, whether he is entitled to the computational benefits of section 1341 with respect to the disgorgement payment; (4) whether petitioner is liable, in the alternative, for additions to tax for fraud under section 6653(b)(1)(A) and (B) or for negligence under section 6653(a)(1)(A) and (B); and (5) whether pet
paid claims that were based in part on excessive royalties that. had been paid to and reported by decedent in prior years. In our previous opinion in these cases, we held that P was entitled to an overpayment of income tax pursuant to application of sec. 1341, I.R.C., and that such overpayment was includable in the taxable estate. Estate of Smith v. Commissioner, 108 T.C. 412 (1997). The parties now disagree on the method of calculating the overpayment. R also seeks to amend the answer in order
Section 1341 Credit In 1970, decedent and her two aunts, Jessamine and Frankie Allen, entered into oil and gas leases from which they derived royalties during the years 1975 through 1980. Jessamine and Frankie Allen died in 1979 and 1989, respectively, and decedent served as the independent executrix of both their estates. Upon Jessamine’s death, d
As a result, we hold that petitioner's section 2053(a)(3) deduction in connection therewith is limited to the amount ultimately paid in settlement of that claim.
the claim. Held, further: The income tax benef t derived by P as a result of the application of sec. 1341(a), I.R.C., is an asset includable in the gross estate. P,'s deduction pursuant to sec.. 2053(a)(3), I.R.C., of its liability to Exxon and its sec. 1341( ), I.R.C., relief based on payment of that liability are so inextricably linked that it would be inappropriate to consider one in the determination of the taxable estate while excluding the other. Michael C. Riddle and Harold A. Chamberla
1341 (1994) (formerly 31 U.S.C. sec. 665). The Antideficiency Act prohibits the executive branch from obligating funds not yet appropriated by Congress. Multiyear contracting is an exception to the full- funding rule. A multiyear contract enabled the Government to provide for up to 5 years of requirements without authorized full funding at the
The District Court stated: “when Congress passed Section 1341 it did not intend to recognize a debt of the Government to the taxpayer during his lifetime and deny the same obligation to his personal representatives and to his estate.” Estate of Good v.
1341 (1994); (3) twenty-nine counts of aiding and assisting in the preparation of false tax returns in violation of section 7206(2); and (4) one count of knowingly making and subscribing a false and fraudulent personal income tax return in violation of section 7206(1).2 The indictment alleged, 2The charges were summarized by the court that con
Issues 8 and 9--Claimed Reduction in 1979 Reported Income Under a Claim of Right and Section 1341 Tax Computation for 1981 .
4 (payment of correct tax liability before notice of deficiency); Gum Products, Inc. v. - 136 - Commissioner, 38 T.C. 700, 706-707 (1962) (nonfraudulent carryback); Elmbrook Home, Inc. v. United States, 559 F.Supp. 787 (D.R.I. 1983) (nonfraudulent sec. 1341 adjustment). Neither side has cited us to, and our research has not disclosed, any other opinion involving the pattern of events that we find in the instant cases for 1983. Respondent contends that petitioner should bear the consequences of t
Issues 8 and 9--Claimed Reduction in 1979 Reported Income Under a Claim of Right and Section 1341 Tax Computation for 1981 .
In the Stein case we pointed out that prior to the enactment of section 1341, I.R.C.