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The first issue we consider is whether, during 1988, Sainte
Claire constructively received the principal of the 1968 note.6
Section 451(a) provides that any item of gross income received by
a taxpayer is to be included in the gross income for the taxable
year in which received, unless the item is to be properly
accounted for during a different period pursuant to the
taxpayer's method of accounting. Section 1.451-1(a), Income Tax
Regs., provides that taxpayers using the cash receipts and
disbursements method of accounting, which Sainte Claire did
during relevant times, shall include in gross income amounts when
actually or constructively received. Section 1.451-2(a), Income
Tax Regs., describes the doctrine of constructive receipt as
follows:
Income although not actually reduced to a taxpayer's
possession is constructively received by him in the
taxable year during which it is credited to his
account, set apart for him, or otherwise made available
so that he may draw upon it at any time, or so that he
5 (...continued)
Sec. 1.1374-1A(c)(1)(i)(A), Income Tax Regs. See generally
Warrensburg Bd. & Paper Corp. v. Commissioner, 77 T.C. 1107
(1981). The exception provided by former sec. 1374(c)(1) does
not apply to Sainte Claire.
6 In briefing this issue, both parties discuss Vaughn v.
Commissioner, 81 T.C. 893 (1983), modified 87 T.C. 164 (1986);
however, neither party notes that this Court subsequently
reconsidered its holding that the taxpayer had constructively
received the proceeds of an installment sale. Vaughn v.
Commissioner, 87 T.C. 164, 167 (1986), modifying 81 T.C. 893
(1983). In reconsidering that holding, this Court also stated
that the discussion of constructive receipt in the earlier
opinion should be disregarded. Id. at 168 n.2. Accordingly, we
do not consider the opinion cited to us by the parties.
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