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do not support the conclusion that Mr. Premji could have cashed
the interest checks. Consequently, because Mr. Premji did not
constructively receive either the $6,444 or $7,088 represented by
the checks, we conclude that neither amount is includable in his
gross income for 1990.
3. Whether The $8,000 Interest Actually Received by Mr. Premji
Should Be Included in His Gross Income for 1990
Mr. Premji received $8,000 as interest in 1990 when he
cashed four M&L interest checks in August 1990. The $8,000 was
Mr. Premji's promised 10 percent return every 8 days on his
initial $20,000 investment.
Although Mr. Premji has conceded that he received the $8,000
in 1990, he contends that it is not includable in his gross
income for that year because the open transaction doctrine
applies, thus allowing him to recover the full amount of his
principal before including any amount of interest in income. He
argues that his placement of funds with M&L constituted a risky
and speculative investment.12 He relies on Burnet v. Logan, 283
U.S. 404 (1931); Underhill v. Commissioner, 45 T.C. 489 (1966);
and Liftin v. Commissioner, 36 T.C. 909, affd. 317 F.2d 234 (4th
Cir. 1963). Respondent counters that Mr. Premji's circumstances
are distinguishable from those cases, and, therefore, the open
12 Mr. Premji has not argued that the amount of interest
he was to receive was uncertain.
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