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returned after a taxpayer has previously included such funds or
property in income rests in the claim of right doctrine itself.
United States v. Skelly Oil Co., supra at 680-681; North Am. Oil
Consol. v. Burnet, supra at 424(stating that, if the taxpayer
were obliged to refund amounts previously included under the
claim of right doctrine, it would be entitled to a deduction when
the amount was returned).
This issue was recently addressed in both Dominion
Resources, Inc. v. United States, supra, and WICOR, Inc. v.
United States, supra, with the courts reaching different
conclusions. The court in Dominion Resources held that the
return of excess deferred Federal income tax is a deductible
expense, whereas, in WICOR, Inc., the court distinguished
Dominion Resources and decided that a mere reduction of future
utility rates did not constitute a deductible business expense.
See also Florida Progress Corp. & Subs. v. Commissioner, 114 T.C.
___ (2000) (also filed this date).
The use of the word “deduction” in section 1341(a)(2) limits
section 1341 applicability to refunds or returns that would
otherwise be deductible under another section of the Internal
Revenue Code. United States v. Skelly Oil Co., supra at 683.
Therefore, the decision on this issue depends upon whether the
return of excess deferred Federal income tax by petitioner is an
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