Charles A. Dennis and Alison M. Dennis - Page 13

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               Generally, income is taxable when it is received.  Sec. 451.           
          When a person receives amounts without an obligation to repay               
          such amounts, and without restriction as to the disposition or              
          use of the amounts received, such amounts are income to the                 
          person.  James v. United States, 366 U.S. 213 (1961).  The                  
          proceeds of a loan are generally not taxable as income because              
          the benefit of the income is offset by an obligation to repay.              
          United States v. Rochelle, 384 F.2d 748 (5th Cir. 1967);                    
          Milenbach v. Commissioner, 106 T.C. 184, 195 (1996).  The                   
          determination of whether or not moneys received are the proceeds            
          of a loan or income is to be determined upon consideration of all           
          of the facts.  Fisher v. Commissioner, 54 T.C. 905, 909 (1970).             
               In the context of insurance agents who receive advances                
          based on future commission income, whether or not such advances             
          constitute income depends on whether, at the time of the making             
          of the payment, the recipient had unfettered use of the funds and           
          whether there was a bona fide obligation on the part of the agent           
          to make repayment.  If the funds advanced are merely deposits, of           
          which the taxpayers do not have free and unrestricted use, they             
          will not be treated as income.  Cf. Van Wagoner v. United States,           
          368 F.2d 95 (5th Cir. 1966).  In many instances, repayment is               
          simply made out of future earned commissions.  Where the                    
          repayments will be taken only from future commissions earned, and           
          the agent would not become personally liable in the event that              
          the future income does not cover the repayment schedule, the                

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