Opinion ID: 2967239
Heading Depth: 5
Heading Rank: 5

Heading: an amount equal to--

Text: (A) the tax for the taxable year computed without such deduction, minus (B) the decrease in tax under this chapter (or the corresponding provisions of prior reve- nue laws) for the prior taxable year (or years) which would result solely from the exclusion of such item (or portion thereof) from gross income for such prior taxable year (or years). 26 U.S.C. § 1341(a). In other words, as the parties agree, to obtain the benefit of § 1341, the following requirements must be met: 1) the taxpayer must appear to have had an unrestricted right to an item included in gross income 5 for a prior taxable year; 2) it must have been established after the close of that prior year that the taxpayer did not have an unrestricted right to the item; 3) the taxpayer must be entitled to deduct the amount of the item; and 4) the amount of the deduction must exceed $3000. The statute further provides that although its relief does not apply to deductions resulting from inventory sales or sales of stock in trade, it does apply if the deduction arises out of[government required] refunds or repayments with respect to rates made by a regulated public utility. 26 U.S.C. § 1341(b)(2). Congress thus ensured that a regulated public utility, like DRI, would be able to benefit from § 1341 when forced by a regulatory authority to refund rate payments to its customers, if the utility otherwise complied with the requirements of § 1341. In this case, the IRS concedes that § 1341's fourth requirement has been met--the amount of the asserted deduction exceeds $3000. The IRS argues, however, that it did not appear that DRI had an unrestricted right to the $10 million item of gross income in a prior tax year, nor was it established after the close of that year that DRI did not have an unrestricted right to such item (the first and second requirements). Brief of Appellant/Cross Appellee at 10-12. Furthermore, the IRS argues, DRI was not entitled to take a deduction for the $10 million (the third requirement). Id. at 13.