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price with a third party for payment to the seller in a later
year. Respondent relies on a line of cases, including Griffith
v. Commissioner, 73 T.C. 933 (1980); Pozzi v. Commissioner, 49
T.C. 119 (1967); and Oden v. Commissioner, 56 T.C. 569 (1971),
among others, which found that the seller no longer looked to the
buyer for payment and expected to collect the sales proceeds from
a third-party source, such as an escrow account. Petitioners,
however, argue that the cases cited by respondent did not involve
circumstances where substantial restrictions existed on the
seller's right to the third-party funds. Money deposited in an
escrow account by a buyer is not deemed to be constructively
received by the seller if the seller's right to receive the funds
is subject to substantial limitations or restrictions. Stiles v.
Commissioner, 69 T.C. 558, 563 (1978); Champy v. Commissioner,
T.C. Memo. 1994-355; see sec. 1.451-2, Income Tax Regs.
Here, the exchange agreement provides that petitioners were
to transfer the Antioch property to Clack Bros. in exchange for
property to be identified by petitioners. To accomplish this,
petitioners were to transfer title and assign the proceeds from
the option agreement on the Antioch property to Clack Bros.
Under the agreement, Clack Bros. would have became the seller;
however, petitioners did not follow the agreement in that they
retained title and transferred it directly to the purchaser.
Clack Bros. did receive the sales proceeds and deposited them
into the trust account. Although the exchange agreement provided
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