an artist's hide hiding a trustee made a mistake it sold trust own stock it had no power or authority or right to sell under the governing trust agreement and to remedy its error as it had a fiduciary obligation to do the trustee reverse the transaction in the only way possible by using the proceeds of the sale to purchase the improperly so to repurchase the improperly sold stock placing the trust in the same position it occupied for the trustees mistake now if the sale and repurchase had taken place in the same calendar year under the doctrine of rescission the taxpayer would not have even been required to report the income from the rever sale at all but because the sale and repurchase took place in different calendar years the taxpayer sought a refund of the income tax paid on the gain of the sale the government rejected and the taxpayer filed suit for the assets was the nine hundred and eighty two decision of the northern district of illinois first national bank of chicago versus united states and in that case it was the government who are and the court agreed that the proper remedy would be under the claim of right statute section one thousand three hundred and forty one dollars with relief in the year of the repayment instead of in the year of the original sale which is what the trustee in that case  hidings are a retired couple the trustee is the trustee administering their retirement savings and the trust is a grant toward trust which means that the hidings report the trust income  ns and credits on their individual return rather than on a separate trust return filed by the trustee they are the only beneficiaries of the trust as the district court here dismissed the hidings claim for refund a voluntary payment rather than involuntary as required under section one thousand three hundred and forty one dollars the district court's judgment should be reversed because just like in the trustee and for chicago the hidings trustee owed them a duty to follow the terms of the trust including the restrictions on the sale of the restricted stock and when the trustee recognized its mistake it had an op a fiduciary obligation to reverse it by repurchasing that same stock the district court distinguished st national bank of chicago on the grounds that the hidings trust on like the trust issue in that case was a grant for trust but the grant for trust rules simply shift the tax reporting and payment obligations onto the grand tours it doesn't change the duties of rights or the remedies that run between trustees and beneficiaries under state law the district court also distinguished for chicago on the basis that the beneficiaries in that case and sued the trustees and obtained a judgment requiring the trustee to repurchase the stock it had sold out of the trust the hidings trustee here recognized its error and undertook to remedy it same stuff but what about the tax and the taxes that's the that is the basis for the d that beneficial to the grand force of the trust paid the tax in the year that they received it and when the transaction was reversed they  responsibility was to remedy the the improper sale your honor and that's what they did whether there's some other risk some other responsibility hasn't  illinois decided almost forty years ago applies when the trustee sells the stock in violation of the trust instrument and then ram it is the remedies that error by re trustee did here then the district court and also  contradicts several decades of circuit court decisions that have found that even taxpayer who owns a controlling share or one hundred percent of the outstanding stock of a corporation that was the end of the regional pay or the entity to whom the repayment was ultimately made was not enough to deem that repayment voluntary so control or the power to consent or disposed of that in the briefs but just to summarize the internal revenue code definition of taxpayer is a person who owes a tax liability or the person who pays the tax liability  it isn't necessarily require exact identity one way or the other in the rob evans and associates case which the government has relied on specific sections of the internal revenue code under which they sought their deduction earth sought their credit their refund or contention that it's not required for purposes of seeking the credit when that's the  the basis for the refund claim but even if it were the that's not required to plead it under rule eight of the federal rules of civil procedure and  we identified in the in the papers a number of sections of the code under which they would seek to have that we seek that refund if that were in fact required  thank you thank your honour's and they please the court generally about the united states the claim of right doctrine is not a remedy for seller's remorse the doctrine doesn't apply where a taxpayer simply wishes to they didn't have an unrestricted right to it as a someone else taxpayers here could not allege that their in their right to income from the two thousand and fifteen stock sale was restricted in any way it was doesn't matter that the trustee bought more of those same stocks in two thousand and sixteen also without taxpayer authorization none of this makes that item of income in two thousand and fifteen not fixed none of this restricts their right to the income none of this puts them within the ambit of the claim of right doctrine the doctrine doesn't apply unless you can show that your right to income is not unrestricted and that you were obligated to restore it which means to turn it over or pay it back to someone that you actually did tax to or did not please and could not plead any of these facts here their right to that income was absolute they were not obligated to restore it to anybody they never did restore it to anyone they reinvested in the stock market plead a right to a deduction under the statute i think the language of the statute fairly clearly establishes that they did but looking more particularly at this transaction and how they attempt to shoehorn it into the statute there are they merely observed that their trustee breached their trust and as your honor noted there are remedies for that that do not involve the american taxpayer reimbursing you have paid tax on income you can be entitled to relief in a later year if with adoption is available if you are believe the language is a judge to restore income or its equivalent and that's where we get the requirement that there be a restoration of income to someone who does have the claim of right to that income because your right is restricted someone else now has a claim on that income it's not  legal obligation to do so that also comes from both the text of the statute and the case law and the computation of your recovery depends on how the previous year i guess on the open market and for a different price then they were sold so it can't even be characterized as a recession because how would you treat them the basis in those stocks is it the purchase price of two thousand and sixteen are you trying to recoup all of that don't precisely know what they paid that's not in the record per share we do know that and this is a footnote one of the government's grief the bank of montreal s dollars seventy cents again vastly different from the seventy two dollars twenty four cents of which it was sold previously so it's not a risk that these are two unrelated transactions except conceptually where the trustee clearly was attempting to make fools taxpayers by putting back what it had taken out of the trust which is these numbers of the shares of these publicly traded common corporate stocks but importantly that was not driven by any result not to the to the result under the claim of right doctor because the income was income to the tax payers no matter what but taxpayers have argued that the  the argument goes in several links the st link is our trustee was obligated under the fiduciary duty imposed on it by the wisconsin for us code to make us whole to fix this this in permissible transaction but then there is a leap to to do that the trustee then went out and made an authorised transaction to breach the trust again in an attempt to make them whole and then they contest they suggest that they should step into their shoes of the trustee and have the seduce shiri duty to cure this breach be imputed to them and that should be read as a restriction on their right to the income and that just doesn't hold up the income was there the income belongs to these two individual tax payers and the fact that they kept it in a trust and the trust was managed by the trustee and the trustee did not abide by the terms of the trust on more than one occasion is not material to the nature of that income which was income to these taxpayers  your honor also asked if they were put back in the same position as they were in two thousand and sixteen after the nd transaction as they had been had two thousand and fifteen transactions not taken place and i think on the fact clear that they w not st of all that as we mentioned before the stock prices were different and significantly different from the purchase transaction for the sale transactions there was a difference in their cost basis in the stock from the initial holding to restoring that that were replenishing their holdings with the same number of shares the the the cost basis of those new shares is probably going to be with the paid and sixteen and they don't recoup that appreciation which they have now taken out and taken as income and pay tax on even recovering the fact isn't going to change that even presuming that they could state a right to recover the tax which they have not done here i also want to have a look one of the last words that's the bottom line what what why are they worse what's there in worse position than they were prior to the banks selling the stuff well clearly the sock was important to them and they carved it out in the special forbidden fruit provision of the trust for reasons that were not lead and aren't on the record we would be speculating but if the stock was of some particular value to them because of maybe a previous working relationship with with the companies or if they had i'm speculating but a plan potentially to pass it on to their heirs there are a lot of reasons why that stock could have been uniquely important to the grand tours of the trust that they would have crafted the the trust instruments to protect that stock in particular losing that is potentially a harm in that their purpose is frustrated and their reason for protecting the stock in that trust is something that they can no we we could not be a difference would be that they have realized capital gains and that now what they've reinvested that gain in the market and their holdings are the same as they were but they're basis is stepped up to the new d is i would i would have to speculate again they're there only that they are unable to transact with their highly appreciated stock as they had planned to  st that the st bank of chicago st i'm going to make sure that i cite it correctly st national bank of chicago is on point here the district court noted that it was the thing liberal on three counts that st of all the the trusts in st national banks were not disregard again for these they were themselves the taxpayers so the income did not flow through to the beneficiaries and the trust not only could who and pay taxes to sort of recover taxes on their behalf of their beneficiaries but there were different questions of ownership of the income at issue there  there was a judgment of record in st national bank that both imposed the restriction on the income from the sale which had which was not publicly traded stock it was a closely held corporation that had been sold and had been sold without people buying with trust terms governing its sale so they did order of a solution there and it did revert to status for ante which is not again what happened here they reinvested again from a stock sale into the stock market and the availability of a deduction in st national bank was not at issue here there unless the court has questions the st issue and this is this is important is the government's position that the the the gain on the sale of the original sale in violation of the trust instrument was their income the hidings income and it doesn't matter if the trustee made a mistake that's that's just wrong regard regardless of whether this is a trusts the hidings were simply paying reporting and paying the income on the trusts items of income and taking their deductions and credits would require it to repay the restore the assets of the trust in a non parental trust we should be looking at the same thing here in a grant or trust  the the financial difference your honor asked about the request for the refund amount is approximately one million three hundred thousand dollars as set forth in the complaint that's the amount of tax that was that the hidings paid on the game council referenced that the funds that the price of the shares had dropped the case law is clear all the way through request that relief the damages that the relief that they are seeking here is a refund of the tax they did not need to pay that's why they are in a different position than they should have then