Clark v. Commissioner, 40 B.T.A. 333 (1939)
Nov 11, 2014 by Vahid Dejwakh

Facts and Procedural History

By listening to his tax advisor and filing joint taxes with his wife, Clark mistakenly overpaid about $20K in taxes. Feeling responsible for this extra payment, the tax advisor pays Clark $20K back.


Should petitioner include the reimbursement from his tax advisor as part of his taxable income or not?

Holding and Dissent(s)

1. No, this reimbursement is NOT income. The recoupement on account of such losses is not income since it is not “derived from capital, from labor or from both combined”
2. The taxpayer merely received “compensation for a loss which impaired [his] capital”

Analysis and Discussion

After this case, Glenshaw Glass (1955) changed the definition of income, such that the reasoning of Clark is no longer valid. However, the holding still is valid today. So, point 1 from the holding above is no longer correct, but point 2 still is correct.

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