26 U.S.C. § 111

Recovery of tax benefit items

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(a) Deductions

Gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter.

(b) Credits(1) In generalIf—(A) a credit was allowable with respect to any amount for any prior taxable year, and(B) during the taxable year there is a downward price adjustment or similar adjustment,the tax imposed by this chapter for the taxable year shall be increased by the amount of the credit attributable to the adjustment.(2) Exception where credit did not reduce tax

Paragraph (1) shall not apply to the extent that the credit allowable for the recovered amount did not reduce the amount of tax imposed by this chapter.

(3) Exception for investment tax credit and foreign tax credit

This subsection shall not apply with respect to the credit determined under section 46 and the foreign tax credit.

For purposes of this section, an increase in a carryover which has not expired before the beginning of the taxable year in which the recovery or adjustment takes place shall be treated as reducing tax imposed by this chapter.

(d) Special rules for accumulated earnings tax and for personal holding company taxIn applying subsection (a) for the purpose of determining the accumulated earnings tax under section 531 or the tax under section 541 (relating to personal holding companies)—(1) any excluded amount under subsection (a) allowed for the purposes of this subtitle (other than section 531 or section 541) shall be allowed whether or not such amount resulted in a reduction of the tax under section 531 or the tax under section 541 for the prior taxable year; and(2) where any excluded amount under subsection (a) was not allowable as a deduction for the prior taxable year for purposes of this subtitle other than of section 531 or section 541 but was allowable for the same taxable year under section 531 or section 541, then such excluded amount shall be allowable if it did not result in a reduction of the tax under section 531 or the tax under section 541.(Aug. 16, 1954, ch. 736, 68A Stat. 33; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–589, § 2(c), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 98–369, div. A, title I, § 171(a), July 18, 1984, 98 Stat. 698; Pub. L. 99–514, title XVIII, § 1812(a)(1), (2), Oct. 22, 1986, 100 Stat. 2833.)Editorial NotesAmendments

1986—Subsec. (a). Pub. L. 99–514, § 1812(a)(1), substituted “did not reduce the amount of tax imposed by this chapter” for “did not reduce income subject to tax”.

Subsec. (c). Pub. L. 99–514, § 1812(a)(2), substituted “reducing tax imposed by this chapter” for “reducing income subject to tax or reducing tax imposed by this chapter, as the case may be”.

1984—Pub. L. 98–369 amended section generally, substituting provisions relating to recovery of tax benefit items for provisions relating to recovery of bad debts, prior taxes, and delinquency amounts.

1980—Subsec. (d). Pub. L. 96–589 added subsec. (d).

1976—Subsec. (b)(4). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related SubsidiariesEffective Date of 1986 Amendment

Amendment by Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 171(c), July 18, 1984, 98 Stat. 699, provided that: “The amendments made by this section [amending this section] shall apply to amounts recovered after December 31, 1983, in taxable years ending after such date.”

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–589 applicable to transactions which occur after Dec. 31, 1980, other than transactions which occur in a proceeding in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11 commencing on or after Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to transactions occurring after Sept. 30, 1979, in a specified manner, see section 7(a)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Notes of Decisions

Cited in 98 cases, 1935–2020 · leading case: Hillsboro National Bank v. Commissioner

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Hillsboro National Bank v. Commissioner (1983) scotus · cites it 4× “Regardless of the presence of § 111 in the Internal Revenue Code of 1954, 26 U. S. C. § 111 (1976 ed. and Supp. V), it is acknowledged that the tax benefit rule is judge-made.”

Berkley v. Gavin (2000) conn · cites it 7× “; see also 26 U.S.C. § 111 (a) (“[g]ross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter”).”

Estate of Brooks v. Commissioner of Revenue Services (2017) conn · cites it 2× “26 U.S.C. § 111 . 10 As a result, whether certain recovered losses were included in Connecticut adjusted gross income in the present year would depend on whether the taxpayer had reduced his state income tax liability, but not necessarily his federal income tax liability, in a…”

United States v. Felix Benitez Rexach (1973) ca1 · cites it 2× “26 U.S.C. § 111 ; 26 C.F.R. § 1.111-1 . Assuming without deciding that the type of losses here alleged are subject to the tax benefit rule, compare Lloyd Faidley v.”

Tennessee-Carolina Transportation, Inc. v. Commissioner of Internal Revenue (1978) ca6 · cites it 2× “Although not expressly stated in the Internal Revenue Code, it has received indirect statutory recognition specifically with respect to bad debts, prior taxes, and delinquency amounts, in 26 U.S.C. § 111 . The rule of the statute has been broadened by the Treasury Regulations to…”

John Hancock Financial Services, Inc., and John Hancock Life Insurance Company (Formerly John Hancock Mutual Life Insura (2004) cafc · cites it 3× “Under the exclusionary aspect of the tax benefit rule, a taxpayer may exclude from income amounts attributable to the recovery during a taxable year of an amount deducted in a prior taxable year to the extent that the deduction did not result in a tax benefit for the taxpayer.”

Bakersfield Energy Partners, LP v. Commissioner (2009) ca9 “12 ; 26 U.S.C. § 111 (a) (1934 & Supp. V), 53 Stat.”

RB Alden Corp. v. Commonwealth (2016) pacommwct · cites it 2× “26 U.S.C. § 111 (a). As a result, Taxpayer claims that given the amendment, there are now no limitations on the type of deductions that can be excluded from income.”

Allstate Insurance Company v. The United States (1991) cafc · cites it 3× “See 26 U.S.C. § 111 (1954). The converse is also true.”

Putoma Corp., Successor by Merger of Pro-Mac Company, Petitioners- Cross-Appellants v. Commissioner of Internal Revenue, (1979) ca5 “” ( 26 U.S.C.A. § 111 ) . Treas.Reg. § 1.111-1 (1956), “Recovery of certain items previously deducted or credited,” provides: “(a) General.”

RB Alden Corp. v. Commonwealth (2017) pacommwct · cites it 2× “) Taxpayer’s third and final exception is to the Majority’s conclusion that Congress’ 1984 amendment to section 111 of the Internal Revenue Code (IRC), 26 U.S.C. § 111 , which addresses the tax benefit rule, did not modify the narrower Treasury Regulation § l.”

Kreisers Inc. v. First Dakota Title Ltd. Partnership (2014) sd “] On appeal, Kreisers posits that the “tax benefit rule” illustrates the erro-neousness and speculative nature of We-nande’s opinion and the circuit court’s decision.”

Show all 98 citing cases →

— 26 U.S.C. § 111(b) — 1 case

Flannery v. United States (1938) mdd

— 26 U.S.C. § 111(c) — 1 case

Kuehner v. Commissioner of Internal Revenue (1954) ca1

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.