The taxpayer, a public high school principal, received—without request—multiple sample textbooks from publishers during the tax years at issue. Publishers commonly distribute such samples to educators and administrators in hopes of influencing textbook selection decisions. The principal neither paid for the books nor reported any amount attributable to them as income upon receipt. Later, he donated the books to his school's library and claimed federal charitable contribution deductions measured by the fair market value of the donated textbooks (amounts totaling several hundred dollars per year). The Internal Revenue Service disallowed the deductions to the extent they were unconstrained by a corresponding income inclusion, reasoning that the taxpayer could not claim a charitable deduction for property he had never included in gross income and that the books were not excludable as "gifts" under the Code. The district court ruled for the taxpayer, but the government appealed. The Seventh Circuit reversed, holding that by asserting a charitable deduction the taxpayer triggered inclusion of the value of the samples in gross income.
Must a taxpayer who receives unsolicited sample property and later donates it to a charity, claiming a charitable deduction, include the fair market value of the samples in gross income under IRC § 61?
Gross income under IRC § 61 includes all accessions to wealth, clearly realized, over which the taxpayer has complete dominion (Commissioner v. Glenshaw Glass Co.). Items transferred to a taxpayer are not excludable as "gifts" under IRC § 102 if the transfer proceeds from the donor's business motives rather than detached and disinterested generosity (Commissioner v. Duberstein). Although the IRS may, for administrative convenience, decline to tax certain unsolicited samples upon mere receipt, a taxpayer who exercises dominion over such property and seeks a charitable deduction under IRC § 170 for its donation must include the property's fair market value in gross income to avoid a double benefit and to ensure parity with the Code's treatment of contributions of appreciated or income-type property.
Yes. When a taxpayer donates unsolicited samples and claims a charitable deduction, the fair market value of those samples must be included in gross income; the samples are not excludable as gifts and the deduction cannot be taken without corresponding income recognition.
The court anchored its analysis in Glenshaw Glass's expansive definition of gross income as undeniable accessions to wealth, clearly realized, and subject to the taxpayer's dominion. The unsolicited textbooks, though not requested, augmented the taxpayer's wealth by conferring valuable property for which he paid nothing. The publishers did not act from detached and disinterested generosity—they sent samples to advance their commercial interests—so the § 102 gift exclusion did not apply under Duberstein's motive test. While acknowledging that the IRS often does not assess income tax on unsolicited samples when taxpayers merely receive or retain them (an administrative practice rooted in convenience and enforcement practicality), the court emphasized that taxpayers cannot exploit that leniency to generate a further tax advantage. By claiming a § 170 charitable deduction based on the books' fair market value, the taxpayer both asserted dominion over the property and sought a deduction for property he had never included in income—effectively creating a windfall and undermining parity among contributors. The court refused to permit a double benefit: noninclusion of value upon receipt coupled with a full deduction upon donation. Requiring inclusion reconciles the Code's structure. It avoids whipsawing the government and aligns with general principles limiting deductions to actual economic outlay or previously taxed amounts. The court also rejected any suggestion that the IRS was estopped by its nonenforcement practice as to mere receipt; a discretionary administrative tolerance does not bar income inclusion when a taxpayer affirmatively leverages the property to obtain a deduction. Thus, once the taxpayer chose to claim a deduction for the unsolicited samples, the Code required him to recognize income in an amount equal to their fair market value.
Haverly matters because it concretely demonstrates how § 61's broad income concept interacts with § 170's charitable deduction regime to prevent unintended windfalls. It teaches that administrative nonenforcement of small, unsolicited benefits does not entitle taxpayers to combine noninclusion with a deduction. For law students, the case is a clean vehicle to apply Glenshaw Glass and Duberstein, to analyze dominion and control, and to appreciate the policy of symmetry in the tax system—deductions typically follow income recognition or actual cost. It also foreshadows modern limitations on deductions for contributions of "ordinary income property" and the broader anti-abuse orientation of charitable contribution rules.
Haverly v. United States enforces a basic symmetry in federal income taxation. The court refused to allow a taxpayer to exclude the value of unsolicited sample property from income while simultaneously securing a charitable deduction based on that same value. By requiring income inclusion upon the assertion of the deduction, the decision harmonizes Glenshaw Glass's broad income concept with the charitable contribution regime and prevents a double tax benefit.