## Facts

- Jack R. and Ursula Goldstone filed joint federal income tax returns for 1967, 1969, and 1970.
- On their 1967 return, they properly claimed a $1,400 investment credit under I.R.C. § 38 for certain investment credit property.
- In October 1967, they transferred assets of their gift shop business, including the credit property, to a newly formed corporation (Golden Gate Fashions, Inc.) in exchange for all its stock in a transaction qualifying for nonrecognition under I.R.C. § 351.
- The corporation disposed of the credit property during the Goldstones’ 1970 taxable year, which triggered the investment credit recapture rules under I.R.C. § 47(a).
- In 1971 and 1972, the Goldstones filed amended 1967 returns seeking to delete the previously claimed investment credit and obtain a refund, asserting this eliminated any recapture obligation in 1970.
- The Commissioner denied the refund claims, treated the original 1967 return as controlling, and determined deficiencies for 1969 and 1970 (and an addition to tax for 1969), leaving the recapture question as the primary dispute.

## Issues

1. Whether taxpayers may use an amended return to delete an investment credit properly claimed on an original return in order to avoid recapture in a later year when the credit property is disposed of.

## Decision

- The Tax Court held the taxpayers could not delete a properly claimed 1967 investment credit through an amended return to avoid recapture in 1970.
- The court sustained the Commissioner’s determination that the original 1967 return was operative and that recapture applied in 1970 under I.R.C. § 47(a).
- Decision was to be entered under Rule 155 for computational adjustments consistent with the court’s holding.

## Legal Principles

- A taxpayer has no statutory right to compel acceptance of an amended return; the Commissioner may, in discretion, treat a valid original return as controlling.
- Amended returns are not a mechanism to retroactively retract a properly claimed credit merely to change later-year tax consequences.
- When an investment credit is properly claimed, I.R.C. § 47(a) requires recapture in the year of disposition if the property is disposed of within the recapture period; later attempts to “erase” the original credit do not negate the statutory recapture obligation.

## Conclusion

Because the 1967 investment credit was properly claimed and the property was disposed of in 1970, the Code required recapture in 1970, and the Commissioner properly rejected the taxpayers’ amended-return attempt to eliminate that recapture by deleting the earlier credit.


Goldstone v. Commissioner, 65 T.C. 113 (1975)