INTRODUCTION TO TAX SCHOOL Top 100 Cases North American Oil v. Burnet, 286 U.S. 417 (1932) © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil is famous for two important propositions: The Claim of Right Doctrine. Every Year Stands Alone. This second proposition is conjunction with two other famous cases: Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. These two cases are also on the top 100 list. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine This is the essential, universally known holding. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine This is the essential, universally known holding. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The famous language of the Claim of Right Doctrine. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The famous language of the Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The famous language of the Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” We will parse it in a moment . . . but first, let’s cover the facts. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The famous language of the Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” We will parse it in a moment . . . but first, let’s cover the facts. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1916 return. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1916 return. Note that NAO had not yet received the money. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1917 return. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1917 return. Note that NAO received the money in 1917. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. Note that NAO included the money in 1916 – the year it was earned, but not received, and when it was subject to a substantial condition. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1920 return. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1920 return. The Company had already included it for 1916 on an amended return. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. NAO did not include the $171,979.22 on its 1922 return. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. If NAO loses this case, it would include the income twice: 1916, the year it was reported. 1917, the year of the deficiency. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. If NAO loses this case, it would include the income twice: 1916, the year it was reported. 1917, the year of the deficiency. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. If NAO loses this case, it would include the income twice: 1916, the year it was reported. 1917, the year of the deficiency. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) FACTS: North American Oil and the U.S. each claimed some property. 1916: the profits were paid to a receiver. 1917: the receiver distributed money to North American Oil. 1918: NAO amended its return for 1916 to include the $171,979.22. 1920: the appellate court ruled it was North American Oil’s money. 1922: the case finally settled. North American Oil kept the money. 1927: the IRS asserted a deficiency against 1917 for the $171,979.22. 1916 was then closed. ISSUE: When was the $171,979.22 taxable to North American Oil? 1916, when earned and received by a receiver? 1917, when received by the taxpayer? 1922, when the courts finally settled that the funds belonged to NAO? HOLDING: The amount was taxable in 1917, when received under a claim of right. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Recall: North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Recall: North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Recall: North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Recall: North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Recall: North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. Let’s discuss the more famous doctrine first. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” It must be something received, not merely earned or accrued. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” It must be something received, not merely earned or accrued. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” It must be something received, not merely earned or accrued. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” Otherwise, the item is not income under the claim of right doctrine . . . although it may be income under some other doctrine. It must be something received, not merely earned or accrued. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” Otherwise, the item is not income under the claim of right doctrine . . . although it may be income under some other doctrine. It must be something received, not merely earned or accrued. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” It must be an income producing item. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” Hence, merely receiving money under a claim of right (such as through borrowing) is not sufficient to produce income. It must be an income producing item. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” Hence, merely receiving money under a claim of right (such as through borrowing) is not sufficient to produce income. It must be an income producing item. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” Hence, merely receiving money under a claim of right (such as through borrowing) is not sufficient to produce income. It must be an income producing item. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” The Taxpayer must have a colorable claim to the earnings received. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” The Taxpayer must have a colorable claim to the earnings received. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” The Taxpayer must have a colorable claim to the earnings received. Although it may be an ultimately flawed claim. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” The Taxpayer must have use of the funds. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine. “If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.” This odd phraseology means: “required to report on a return.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. These factors produce income. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. These factors produce income. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) Claim of Right Doctrine Summary: Receipt. Earnings. Colorable Claim. Unrestricted Use. These factors produce income. The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). Every year stands alone. What happens in one year does not affect tax treatment in another year. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) North American Oil stands for two propositions: The Claim of Right Doctrine. Every Year Stands Alone. In conjunction with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). Every year stands alone. What happens in one year does not affect tax treatment in another year. Tax treatment in any year is a function of other years’ proper treatment rather than actual treatment. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The Rule Has Numerous Exceptions All the equitable doctrines [e.g., equitable recoupment, duty of consistency, judicial estoppel], plus statutory mitigation, § 1341 and many other codified rules provide exceptions to the general rule that every year stands alone. Thus, we will see many instances in which what happens in one year directly affects another year. Nevertheless, the general rule is where we begin: it helps provide some framework to what otherwise might seem a disorganized system. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The Rule Has Numerous Exceptions All the equitable doctrines [e.g., equitable recoupment, duty of consistency, judicial estoppel], plus statutory mitigation, § 1341 and many other codified rules provide exceptions to the general rule that every year stands alone. Thus, we will see many instances in which what happens in one year directly affects another year. Nevertheless, the general rule is where we begin: it helps provide some framework to what otherwise might seem a disorganized system. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The Rule Has Numerous Exceptions All the equitable doctrines [e.g., equitable recoupment, duty of consistency, judicial estoppel], plus statutory mitigation, § 1341 and many other codified rules provide exceptions to the general rule that every year stands alone. Thus, we will see many instances in which what happens in one year directly affects another year. Nevertheless, the general rule is where we begin: it helps provide some framework to what otherwise might seem a disorganized system. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) The Rule Has Numerous Exceptions All the equitable doctrines [e.g., equitable recoupment, duty of consistency, judicial estoppel], plus statutory mitigation, § 1341 and many other codified rules provide exceptions to the general rule that every year stands alone. Thus, we will see many instances in which what happens in one year directly affects another year. Nevertheless, the general rule is where we begin: it helps provide some framework to what otherwise might seem a disorganized system. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” This language prompts these two conclusions: © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” This language prompts these two conclusions: 1. If North American Oil restored the money, it could deduct the restoration in 1922 and could not amend 1917. 2. This 1922 deduction would not be conditioned on how North American Oil reported 1917. Apparently, a restoration in 1922 would be deductible even if the company had omitted the income in all prior years. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” This language prompts these two conclusions: 1. If North American Oil restored the money, it could deduct the restoration in 1922 and could not amend 1917. 2. This 1922 deduction would not be conditioned on how North American Oil reported 1917. Apparently, a restoration in 1922 would be deductible even if the company had omitted the income in all prior years. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” This language prompts these two conclusions: This conclusion is universally accepted. 1. If North American Oil restored the money, it could deduct the restoration in 1922 and could not amend 1917. 2. This 1922 deduction would not be conditioned on how North American Oil reported 1917. Apparently, a restoration in 1922 would be deductible even if the company had omitted the income in all prior years. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) “If in 1922 the Government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year.” This language prompts these two conclusions: 1. If North American Oil restored the money, it could deduct the restoration in 1922 and could not amend 1917. 2. This 1922 deduction would not be conditioned on how North American Oil reported 1917. Apparently, a restoration in 1922 would be deductible even if the company had omitted the income in all prior years. This conclusion is less widely understood. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of “North American Oil,” you should think of: The Claim of Right Doctrine You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: The Claim of Right Doctrine You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine This is the essential, universally known holding. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine This is the essential, universally known holding. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should associate the case with the general rule that ould also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should associate the case with the general rule that ould also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should associate the case with the general rule that ould also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). The Claim of Right Doctrine Every year stands alone. Ideally, you should also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) and U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006

North American Oil v. Burnet, 286 U.S. 417 (1932) To summarize: When you hear of North American Oil you must think of: You should associate the case with the general rule that The Claim of Right Doctrine Every year stands alone. Ideally, you should also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) and U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis 2006