Tax Court Allows Firm’s Deduction for Fixing Accounting Mistake

Mortgage loan originator Norwich Commercial Group Inc. can claim a tax deduction for actions it took to correct an accounting error under the claim of right doctrine, the US Tax Court said.

Judge Elizabeth A. Copeland said the company’s invocation of the doctrine was proper. Claim of right is a principle that a taxpayer must report earnings they’ve received without restriction as to its disposition, even if they are required to repay the money to its source.

Accordingly the judge allowed Norwich to deduct nearly $7 million in income from it’s 2014 tax liability. She also overturned an IRS decision ...