- 3 -
a statutory notice of deficiency that increased petitioners' 1993
interest income by $14,845 to reflect the unreported original
issue discount.3
Respondent's determinations in the statutory notice of
deficiency are presumed to be correct, and petitioners bear the
burden of proving otherwise. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
Section 61(a) includes in gross income all income from
whatever source derived. The amount of any item of gross income
shall be included in the gross income for the taxable year in
which it is received by the taxpayer under the taxpayer's method
of accounting. Sec. 451(a). Petitioners use the cash receipts
and disbursements method to compute their income. See sec.
446(c)(1). Generally, under the cash receipts and disbursements
method, all items which constitute gross income, whether in the
form of cash, property, or services, are to be included for the
taxable year in which actually or constructively received. Sec.
1.446-1(c)(1)(i), Income Tax Regs. However, special rules exist
under sections 1271 through 1275 for the ratable inclusion of
original issue discount in respect of certain corporate
obligations. Sec. 1.451-1(d), Income Tax Regs.
3 The difference between the original issue discount
amount reported on the Form 1099 and the amount determined in the
statutory notice of deficiency is due to rounding.
Page: Previous 1 2 3 4 5 Next
Last modified: May 25, 2011