United States v. Skelly Oil Co

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.

Facts. 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