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United States v. Skelly Oil Co

Citation. United States v. Skelly Oil Co., 394 U.S. 678, 89 S. Ct. 1379, 22 L. Ed. 2d 642, 69-1 U.S. Tax Cas. (CCH) P9343, 23 A.F.T.R.2d (RIA) 1186, 33 Oil & Gas Rep. 192 (U.S. Apr. 21, 1969)
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Brief Fact Summary.

Respondent was in the natural gas business in Oklahoma. After a change in the minimum price order on natural gas, Respondent had to refund a large amount of money to customers previously claimed as gross income.

Synopsis of Rule of Law.

If a taxpayer was not entitled to keep money, he is entitled to a deduction in the year it is refunded.


In 1958 Respondent refunded $505,536 to two of its customers for overcharges during the past six years. Respondent was a producer of natural gas in Oklahoma and had set its prices in accordance with a minimum price order of the Oklahoma Corporation Commission. When the order was vacated, Respondent settled a number of claims filed by its customers including the two at issue. The amount of the refund was included in Respondent’s gross income, but Respondent was allowed a percentage depletion of 27

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