Law School Case Briefs
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Alice Phelan Sullivan Corporation, a California Corporation v. The United States
United States Court of Claims (1967) | 381 F.2d 399; 180 Ct. Cl. 659; 20 A.F.T.R.2d (RIA) 5137; 1967 U.S. Ct. Cl. LEXIS 14
TL;DR: A corporation donated property and took a tax deduction. When the property was returned years later, the court held the recovery was taxable income in the year of return, at that year's higher tax rate, not the lower rate from the year the deduction was originally taken.
Legal Significance: This case establishes that under the tax benefit rule, a recovered deduction is income in the year of recovery and is taxed at that year's rates, reinforcing the principle of annual accounting over equitable arguments for limiting tax liability to the original benefit.