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Alice Phelan Sullivan Corporation, a California Corporation v. The United States Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A corporation donated property and took a tax deduction. When the property was returned years later, the court held the recovery was taxable income in the year of return, at that year’s higher tax rate, not the lower rate from the year the deduction was originally taken.
Legal Significance: This case establishes that under the tax benefit rule, a recovered deduction is income in the year of recovery and is taxed at that year’s rates, reinforcing the principle of annual accounting over equitable arguments for limiting tax liability to the original benefit.
Alice Phelan Sullivan Corporation, a California Corporation v. The United States Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
In 1939 and 1940, Alice Phelan Sullivan Corporation donated two parcels of real estate for religious or educational purposes, claiming charitable contribution deductions totaling $8,706.93. The corporate tax rates in those years were 18% and 24%, respectively, resulting in a total tax benefit to the corporation of $1,877.49. In 1957, the donee, having decided not to use the property for the specified purposes, reconveyed it to the corporation. The Commissioner of Internal Revenue treated the fair market value of the returned property ($8,706.93) as taxable income for the corporation in 1957. Applying the 1957 corporate tax rate of 52%, the Commissioner assessed a deficiency of $4,527.60. The corporation paid the deficiency and filed a suit for a refund, arguing that its tax liability on the recovery should be limited to the amount of the tax benefit it originally received ($1,877.49), citing the court’s prior holding in Perry v. United States.
Court Holding & Legal Precedent
Issue: When a taxpayer recovers property for which a charitable deduction was taken in a prior tax year, must the resulting income be taxed at the rate in effect during the year of the recovery or the rate in effect during the year the deduction was taken?
The court held for the United States. The recovery of the previously Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex
IRAC Legal Analysis
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IRAC (Issue, Rule, Analysis, Conclusion) is the exact format professors want to see in your exam answers. Our exclusive Flash-to-Full briefs combine holding, analysis, and rule statements formatted to match what A+ students produce in exams. These structured briefs help reinforce the essential legal reasoning patterns expected in law school.
Legal Issue
When a taxpayer recovers property for which a charitable deduction was taken in a prior tax year, must the resulting income be taxed at the rate in effect during the year of the recovery or the rate in effect during the year the deduction was taken?
Conclusion
This decision solidifies the modern application of the tax benefit rule, prioritizing Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Legal Rule
The recovery of property that was the subject of a prior income Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate
Legal Analysis
The court's analysis centers on the interplay between the tax benefit rule Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ull
Flash-to-Full Case Opinions
Flash Summary
- The recovery of property for which a charitable deduction was previously