ALICE PHELAN SULLIVAN CORP. V. U.S.
381 F.2d 399 (1967)
NATURE OF THE CASE: This was a dispute over the recovery of alleged overpayment in income
tax. The IRS (D) filed a motion for summary judgment in an action by Phelan (P) to recover
an alleged overpayment in its income tax during a year that two parcels of realty were
returned to P after they had been donated and claimed as a charitable contribution deduction.
FACTS: P donated several parcels of property to charity. The first donation was made in
1939 and the second was made in 1940. Under applicable corporate tax rates P claimed
deductions of $4,243.49 and $4,463.44. These resulted in aggregate tax benefits of
$1,877.49. The lands were conveyed subject to the condition that the property be used either
for religious or for educational purposes. In 1957, the donee decided not to use the gifts
and they were reconveyed to P. P decided to characterize the property as a nontaxable return
of capital. The IRS did not find that amusing. The IRS added income of $8,706.93 and this
raised the corporate tax rate of P and resulted in an assessment of $4,527.60. P paid then
filed for a refund of $2,650.11 under the theory that the correct assessment was the return
of the tax benefit originally enjoyed. That claim was disallowed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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