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1990 under the installment method of section 453. Section 453
permits taxpayers to report gain from the sale of property in the
year payment is received. Payment includes amounts either
actually or constructively received by the taxpayer. Sec.
15A.453-1(b)(3)(i), Temporary Income Tax Regs., 46 Fed. Reg.
10710 (Feb. 4, 1981). Taxpayers are not entitled to report gain
under the installment method if they directly or indirectly
control the sales proceeds or receive the economic benefit
therefrom. Roberts v. Commissioner, 643 F.2d 654, 656 (9th Cir.
1981) (citing Rushing v. Commissioner, 441 F.2d 593, 598 (5th
Cir. 1971), affg. 52 T.C. 888 (1969)), affg. 71 T.C. 311 (1978);
Estate of Silverman v. Commissioner, 98 T.C. 54, 64 (1992).
Respondent contends that petitioners are not entitled to use
the installment sale method because petitioners constructively
received the sales proceeds and received economic benefits from
the proceeds in 1989. Respondent argues that petitioners
obtained control over the sales proceeds when they were deposited
into the Clack Bros.' trust account. The funds were used to make
earnest money deposits on replacement properties that petitioners
wanted to acquire, and petitioners negotiated the purchase price
on the properties. Based on these facts, respondent contends
that petitioners directed how and when the sale proceeds were
spent and, thus, had control over the sales proceeds.
Respondent argues that a seller cannot defer gain
recognition under the installment method by placing the purchase
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