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liable for the 10-percent additional tax under section 72(t). We
first consider whether petitioner received unreported wages.
Issue (1): Unreported Wages
For a taxpayer who uses the cash receipts and disbursements
method of accounting, an item is includable in gross income in
the year in which the item is actually or constructively
received. Sec. 451(a); sec. 1.451-1(a), Income Tax Regs. Thus:
Income although not actually reduced to a
taxpayer's possession is constructively received by him
in the taxable year during which it is credited to his
account, set apart for him, or otherwise made available
so that he may draw upon it at any time * * * .
However, income is not constructively received if the
taxpayer's control of its receipt is subject to
substantial limitations or restrictions. [Sec. 1.451-
2(a), Income Tax Regs.]
Respondent does not contend that petitioner actually
received the net wages withheld by the school district in 1990.
Rather, respondent contends that petitioner constructively
received such amount. Specifically, respondent argues that
petitioner incurred a debt as a result of the auditor's
determination that petitioner received excess travel advances and
that such debt was discharged through the withholding of net
wages. From this, respondent concludes that petitioner
constructively received the net wages withheld by the school
district in 1990.
We disagree with respondent. The record demonstrates that
from the time of the auditor's determination in September 1990,
petitioner has continuously and vigorously denied that he was
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