-48-
v. Burnet, 286 U.S. 417, 424 (1932). "The mere fact that income
received by a taxpayer may have to be returned at some later time
does not deprive it of its character as taxable income when
received." Woolard v. Commissioner, 47 T.C. 274, 279 (1966). To
avoid the application of the claim of right doctrine, however,
the recipient must recognize in the year of receipt an existing
and fixed obligation to repay the amount received and must make
provisions for repayment. Hope v. Commissioner, 55 T.C. 1020,
1030 (1971), affd. 471 F.2d 738 (3d Cir. 1973). A restriction on
the disposition or the use of the funds may also prevent the
application of the claim of right doctrine. Commissioner v.
Indianapolis Power & Light Co., 493 U.S. 203, 209 (1990).
Petitioners have not met these exceptions.
Petitioner was under a contingent, not a fixed, obligation
to repay the funds to Kortava pursuant to their agreement.
Furthermore, while Kortava may have had in mind a restriction on
the use of the funds, petitioner deposited the $38,000 in one of
his personal accounts, not in one of Coastline's accounts.
Respondent's determination that petitioners failed to report
$38,000 that was received from Kortava during 1990 will be
sustained. In accord with the parties' agreement, a
corresponding reduction will be made in petitioners' 1991
Schedule C income from operation of the vehicle resale business.
Schedule C Expenses--1991
On their 1991 Schedule C, petitioners claimed expenses
relating to a vehicle resale business and a business school.
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