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Claim of right

The term claim of right is used in the Code in connection with money or ther property received as income which the recipient holds under a claim of right, but which the recipient is required to restore in whole or in part to the payer in a later year because it develops that the recipient did not have an unrestricted right to such property. If the amount restored exceeds $3,000, Code Sec. 1341 provides some relief, by means of a tax limitation in the year of restoration, from the requirement that the restored amount must be deducted in the year of restoration and may not reduce the income of the prior year. The right to the money or other property means a just and legal claim to hold, use, or enjoy it, or to convey or donate it.