Tax Legal Services · Primary-source case analysis

North American Oil: Claim-of-Right Income Is Taxed When Control Becomes Unrestricted

By Aneeta Mishra and Timothy Chan

Published September 3, 2026

North American Oil Consolidated v. Burnet determined the proper tax year for profits earned by property held by a court-appointed receiver while ownership remained disputed.

A receiver held disputed property profits

The government challenged the taxpayer’s title to producing property, and a receiver earned profits in 1916 while the litigation remained unresolved.

The taxpayer obtained unrestricted control in 1917

After the district court ruled for the taxpayer, the receiver paid over the profits. The government’s appeal continued, but the taxpayer then possessed the money under a claim of right without restriction on its disposition.

The receipt year controlled

The profits were not taxable to the company while held by the receiver in 1916 and were not postponed until final appellate resolution in 1922. They were income in 1917 when the company obtained control.

A later repayment would be handled later

If the taxpayer had ultimately lost and repaid the funds, the repayment would have generated the deduction or other treatment allowed in that later year. Current section 1341 may alter the consequences in qualifying cases.

Key takeaways

• Identify the year unrestricted control began.
• Document any legal restriction on disposition.
• Do not postpone income merely because an appeal remains pending.
• Analyze section 1341 and repayment rules if the claimed right later fails.