Richard R. Hamlett - Page 9

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          transactions, does not protect petitioner from taxation on the              
          $100,000, citing James v. United States, 366 U.S. 213 (1961).               
          Respondent also contends that petitioner’s 1996 fraudulent                  
          purpose contradicts petitioner’s alternative contention that the            
          $100,000 is excludable as a gift.                                           
               We agree with respondent.                                              
          A.  Claim of Right Doctrine                                                 
               In Nordberg v. Commissioner, 79 T.C. 655, 664-665 (1982),              
          affd. without published opinion 720 F.2d 658 (1st Cir. 1983), we            
          described the claim of right doctrine as follows:                           
                    This case presents merely another variation of the                
               familiar “claim of right” doctrine pursuant to which the               
               receipt of money under a claim of right which would                    
               otherwise represent taxable income must be treated as                  
               taxable income even though the recipient may be under a                
               contingent obligation to return it at a later time.  In                
               North American Oil Consolidated v. Burnet, 285 U.S. 417                
               (1932), often regarded as the seminal case in this area, the           
               Supreme Court stated (at 424):                                         
                    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.  [Citations            
               Although this doctrine has been applied “in a variety of               
               contexts,” the situations have shared “a common factual                
               element: the receipt of money or other property by a                   
               taxpayer with an imperfect right to retain it.”  Wootton,              
               “The Claim of Right Doctrine and Section 1341,” 34 Tax Law.            
               297 (1981).  * * *                                                     
                    Proceeding from the indisputable premise that “One of             
               the basic aspects of the federal income tax is that there be           
               an annual accounting of income” (Healy v. Commissioner, 345            

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