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Income Tax Regs. Petitioners rely on the portion of section
1.451-2(a), Income Tax Regs., which provides that “income is not
constructively received if the taxpayer’s control of its receipt
is subject to substantial limitations or restrictions.” Id.
In the instant case, the parties disagree over whether
during 1992 Mr. Enyart received ownership of the B&L equipment as
contended by respondent or received only the right to use that
equipment as contended by petitioners. The constructive receipt
doctrine does not control resolution of that disagreement. Nor
does that doctrine govern resolution of the parties’ dispute over
the value of what Mr. Enyart received during the year at issue in
return for his covenant not to compete with B&L.5
5According to petitioners’ reply brief, “the real issue for
the court to decide is how to value the receipt of this [B&L]
equipment given the amount of liens encumbering the property at
such time” as B&L transferred that equipment to Mr. Enyart.
Petitioners have not, however, presented any evidence and make no
argument about their position as to what the value of the B&L
equipment that Mr. Enyart received during 1992 is or the amount
of ordinary income that they have for that year as a result of
B&L’s transfer during that year of the B&L equipment to Mr.
Enyart. Petitioners merely state in their opening brief: “Under
the matching principle, petitioners reported the value of the
[B&L] equipment from a timing perspective with the amortization
deduction taken by B&L.” In their reply brief, petitioners
further state that they
reported the receipt of the [B&L] equipment in a manner
consistent with the related amortization deduction
taken by B&L with whom petitioner negotiated the cove-
nant not to compete. This method was chosen as Peti-
tioner did not know how to value the receipt of the
equipment under this set of facts and there appeared to
be no statutory or case law on point.
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Last modified: May 25, 2011