Analyze all or a portion of North American Oil Consol. v. Burnet, using the Issue, Rule, Application, and Conclusion methodology in your comments below. Remember to “Blue Book” where appropriate.
North American Oil Consol. v. Burnet, 286 US 417 – Supreme Court 1932
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Facts: Taxpayer earned income in 1916 upon entry of a lower court decree. In 1917, taxpayer received income from the operation of properties whose ownership had been disputed. Taxpayer’s right to the funds was finally established when the lower court opinion was affirmed in 1922.
Issue: When are disputed funds taxable?
Rule: Claim of Right Doctrine
Application: If taxpayer receives earnings under a claim or right and without restriction as to their disposition, taxpayer receives income.
Conclusion: Disputed funds are taxable upon their receipt – regardless of whether further litigation might take them away.