Sundstrand Corporation v. Commissioner of Internal Revenue

POSNER, Chief Judge.

Ordinarily when a taxpayer repays money that he had previously received as income and included in his gross income in the year of receipt, he can deduct the payment from his current income in figuring his current income tax liability but he cannot go back and recompute his tax liability for the year in which he received the money that he is now repaying. Money received under a claim of entitlement to it as income is income for purposes of the federal income tax even if the claim is defeasible and eventually defeated. E.g., North American Oil Consolidated v. Burnet, 286…