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Law School Case Brief

Haverly v. United States - 513 F.2d 224 (7th Cir. 1975)

Rule:

It was the intention of congress in 26 U.S.C.S. § 61(a) to use the full measure of its taxing power and to tax all gains except those specifically exempted. The language of 26 U.S.C.S. § 61(a) encompasses all accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.

Facts:

Charles N. Haverly, a school principal, received unsolicited textbooks from publishers. He donated them to a library and took a tax deduction. Appellant United States claimed the books were income and assessed additional tax. Haverly paid the tax, filed a claim for refund, and then, instituted this action. The district court found that the textbooks were not income and ordered United States to give Haverly a refund. 

Issue:

Did the value of unsolicited sample textbooks sent by publishers to Haverly, which he subsequently donated to the school's library and for which he claimed a charitable deduction, constitute gross income to Haverly within the meaning of Section 61 of the Internal Revenue Code of 195426 U.S.C. § 61?

Answer:

Yes

Conclusion:

The court held that the language of 26 U.S.C.S. § 61(a) encompassed all accessions to wealth, clearly realized, over which the taxpayers had complete dominion. The court ruled that when the intent to exercise complete dominion over unsolicited samples was demonstrated by donating those samples to a charitable institution and taking a tax deduction therefor, the value of the samples received constituted gross income. The court reversed and remanded.

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