Affiliated Foods, Inc., A Corporation - Page 27




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              With respect to each vendor receiving petitioner-delivered              
         currency, the delivery was of either, or both of, promotional-               
         allowance currency or vendor-check currency.  A vendor retained              
         control of its promotional allowance account,7 and only upon its             
         specific instruction was petitioner authorized to charge the                 
         account and deliver a specified amount of currency to the vendor             
         at the food show.  Petitioner had no discretion in the matter.               
         Petitioner likewise lacked discretion with respect to the                    
         proceeds of a vendor’s check that it delivered to the vendor at              
         the food show.  In N. Am. Oil Consol. v. Burnet, 286 U.S. 417,               
         424 (1932), the Supreme Court announced what has been termed the             
         “claim-of-right” doctrine:                                                   
              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.  * * *                       
         The doctrine does not apply to amounts a taxpayer receives as a              
         mere conduit or agent for transmittal to another.  E.g.,                     
         Apothaker v. Commissioner, T.C. Memo. 1985-445.  Indeed, in a                
         case predating subchapter T and upholding the payer corporation’s            
         exclusion from gross income of patronage based refunds, the Court            
         of Appeals for the Fifth Circuit grounded its analysis in part on            
         the following proposition:  “‘[I]n order for receipts to                     


               7  See supra note 5.                                                   






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