The email address cannot be subscribed. Please, do it again. Second, some gross income repayments are not excluded. In particular, if a returnee makes an error and reimburses a client for the resulting additional taxes or penalties paid by the taxpayer, the refund is not excluded in the gross income. Clark v. Commissioner, 40 BTA 333, 1939. Planning is always advised that the client first pays the tax and is then reimbursed by the returnee in order to avoid incorporation into the income. Indeed, if the returnee first pays the additional taxes or penalties incurred by the client, then this payment is the taxable income of the client in Treas. Reg.
1.61-14 (a). See also Ltr. Rul 7749029..