- 26 -
respect to the reasonable compensation issue for its 1993 and
1994 fiscal years.
Issue 3. Interest Income
The next issue for our consideration is whether Mr. and Mrs.
Heitz constructively received interest income of $87,056 and
$106,903 for the taxable years 1992 and 1993, respectively. In
the notice of deficiency, respondent determined that Mr. and Mrs.
Heitz constructively received interest income. This interest
income represents amounts that were accrued and deducted by
Exacto during calendar years 1992 or 1993 but were not actually
paid to Mr. and Mrs. Heitz until the following year. Respondent
argues that because Mr. Heitz was in control of Exacto, he had
the power to compel payment of the interest, and therefore he and
his wife constructively received the interest income. Mr. and
Mrs. Heitz argue that the doctrine of constructive receipt is
inapplicable because Exacto had no funds to make the interest
payments, and Mr. Heitz had no discretion to order Exacto to make
the interest payments because corporate checks required two
signatures. We agree with respondent. To the extent the
arguments of petitioners are not addressed herein, we find them
to be without merit.
Cash basis taxpayers such as Mr. and Mrs. Heitz must include
in their income amounts which they have received, actually or
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011