P paid $54,500 to U. S. Financial Corp. towards the purchase of condominiums. He was told that the payment represented deductible prepaid interest and that the paperwork regarding the purchase would be completed in March 1970. Unvert deducted the $54,500 for calendar year 1969 as an interest expense. P was never given any documents reflecting the terms of the purchase. In June 1971, he requested the documents and in May 1972, it agreed to return without interest the $54,500 paid in December 1969. P did not include as income the funds returned by U. S. Financial. The statute of limitations on the 1969 return ran on April 15, 1973. In August 1973, D concluded an audit of P's 1970 and 1971 returns, recommending that the condominium-related expenses be disallowed because P was never the legal owner of the condominiums. D issued a notice of deficiency for 1972 on the basis that the $54,500 recovered in 1972 was taxable income under the tax benefit rule. P petitioned the Tax Court which held for D. P appealed.

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