## Facts

- Charles N. Haverly, a Chicago public elementary school principal, received unsolicited sample textbooks from publishers in 1967 and 1968.
- The parties stipulated that the fair market value of the samples was $400 each year at the time of receipt.
- The samples were provided for Haverly’s personal retention or any disposition he chose, to aid his evaluation of the books for possible school use.
- The publishers did not intend the books as compensation, and the transfers were stipulated not to be “gifts” excludable under I.R.C. § 102.
- In 1968, Haverly donated the sample textbooks to the school library.
- On his 1968 return, Haverly claimed a $400 charitable contribution deduction under I.R.C. § 170 but did not include the value of the books in gross income.
- The IRS assessed a deficiency treating the $400 as income in 1968; Haverly paid and sued for a refund.
- The district court ruled for Haverly and ordered a refund; the United States appealed.

## Issues

1. Whether the value of unsolicited sample textbooks constitutes gross income under I.R.C. § 61 when the recipient donates the books to charity and claims a charitable deduction for their value.
2. Whether claiming a charitable deduction for unsolicited property demonstrates sufficient realization and dominion to require income inclusion.

## Decision

- The Seventh Circuit reversed the district court.
- The court held that when a taxpayer donates unsolicited sample textbooks to charity and claims a charitable deduction for their value, the value must be included in gross income under I.R.C. § 61 in the year of the donation/deduction.
- The case was resolved on stipulated facts; the taxpayer was required to report $400 of income in 1968 corresponding to the claimed $400 charitable deduction.

## Legal Principles

- I.R.C. § 61 broadly includes “accessions to wealth, clearly realized, and over which the taxpayer has complete dominion.”
- Unsolicited property not treated as a gift under I.R.C. § 102 may create taxable income when the recipient exercises dominion in a way that clearly realizes an economic benefit.
- Donating unsolicited property and claiming a charitable deduction for its value evidences acceptance and dominion sufficient to trigger income inclusion.
- Tax law generally disfavors allowing both exclusion of a receipt from income and a deduction for the same value; requiring inclusion when a deduction is claimed prevents a double tax benefit.
- The holding was limited to the setting where the taxpayer both disposes of unsolicited property by charitable donation and claims a deduction for that value, rather than addressing taxation upon mere receipt in all cases.

## Conclusion

The court required income inclusion for the fair market value of unsolicited sample textbooks where the taxpayer donated them to charity and claimed a charitable contribution deduction, treating the deduction-claiming donation as a realized accession to wealth under I.R.C. § 61 and preventing a double tax benefit.


Haverly v. United States, 513 F.2d 224 (7th Cir. 1975)