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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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