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amount of the funds received. During the years in issue, SDI
advanced a total of $275,661 to Mr. McCurley and $138,596 to Mr.
Hall. SDI did not demand repayment of, and Messrs. McCurley and
Hall did not repay, any of the advances.
During the years in issue, the McCurleys and Halls filed
joint Federal income tax returns. On those returns, they did not
report their advances from SDI as income. For each of the years
in issue, certified public accountants prepared the McCurleys'
and Halls' tax returns.
Respondent issued notices of deficiency to the McCurleys
relating to their 1988, 1989, 1990, 1991, and 1992 returns.
Respondent also issued a notice of deficiency to the Halls
relating to their 1989, 1990, and 1991 returns. Respondent
determined that Messrs. McCurley and Hall had income equal to the
amounts SDI advanced to them. In the alternative, respondent
determined that 75 percent of the annual increases in Messrs.
McCurley's and Hall's redemption accounts was taxable to them as
income constructively received. For the McCurleys' 1992 tax
year, respondent determined a deficiency based solely on the
constructive receipt theory. Respondent concedes that if we
conclude petitioners received income when advances were made to
them, there will be no deficiency in the McCurleys' 1992 income
tax. Respondent also determined an addition to tax and accuracy-
related penalties.
OPINION
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