Section 1341 "Claim of Right" Refunds: Calculating Tax Benefits, Avoiding Double Taxation on Repayments and Claw-Backs

The June 2016 tax court case of Udeobong v. Comm'r illustrated the importance of tracking payments and claw-backs of previously taxed income. In Udeobong, a taxpayer who received insurance payments in one year, repaid the amount in the following year and then collected the money in a subsequent year, ended up paying tax on the amount twice due to his failure to pursue his claim of right to credit or deduction in the year he repaid the income.

Taxpayers facing income claw-backs or other repayments or forfeitures of previously reported income may request a refund under the claim of right doctrine of Section 1341, but must do so in the year of the repayment. However, identifying circumstances in which a claim of right deduction can be challenging, and failure to establish that the taxpayer has met the requirements to document a Section 1341 claim can result in costly tax consequences.

While the mechanics of reporting a Section 1341 claim are relatively straightforward, taxpayers have options as to how to claim the optimal tax benefit from the claim. Advisers should be able to determine whether claiming a Schedule A deduction or calculating and claiming a credit provides the best tax benefit. Advisers should also be aware of the impact of claim of right tax benefits on state income tax returns.

Listen as our experienced panel provides a thorough and practical guide to properly reporting claim of right tax benefits under Section 1341.

1. Section 1341 claim of right and tax benefits doctrine
2. Identifying claim of right circumstances and criteria
3. Documentation of Section 1341 claim
4. Calculating and reporting Section 1341 claim of right tax benefit

The panel will discuss these and other important topics:

• Identifying circumstances in which a claim of right claim is appropriate
• Documenting Section 1341 claim for tax benefit
• Reporting a Section 1341 claim for tax benefit

Learning Objectives

After completing this course, you will be able to:

• Detail the requirements for making a Section 1341 claim of right
• Identify taxpayer circumstances which require a timely filing of a Section 1341 claim
• Recognize available options for maximizing tax benefits under a claim of right refund or credit

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Basic knowledge of taxation.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).