Law School Case Brief
N. Am. Oil Consol. v. Burnet - 286 U.S. 417, 52 S. Ct. 613 (1932)
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.
North American Oil Consolidated (North American) became liable for income tax on disputed property in the year when the receiver paid the earnings to the corporation. During a controversy over ownership of oil-producing land, a receiver was appointed to manage the property and to hold the earnings. North American did not pay taxes on those earnings until after the receivership was dissolved, and the earnings were paid to petitioner. North American then filed an amended return seeking to apply the payment to the tax year in which the money was actually earned. The Board of Tax Appeals ruled for petitioner, and the appellate court reversed.
Was the sum of $171,979.22 received by North American in 1917, taxable to it as income of that year?
The U.S. Supreme Court affirmed the appellate court's determination that the income was taxable in the year that North American actually received it. The receiver was not required to file a tax return because such an obligation was imposed under § 13(c) of the Revenue Act of 1916 only where a receiver controlled all properties of a corporation. Because North American had no right to demand payment from the receiver and might never have obtained the income, no constructive receipt of profits occurred in the year before payment was made to North American.
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