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form of cash. It is sufficient that such items can be valued in
terms of money.” Nevertheless, generally, a cash-method taxpayer
only takes into account an item of gross income when actually or
constructively received. Sec. 1.446-1(c)(1)(i), Income Tax Regs.
A promise to pay is includable in gross income when received by a
cash-method taxpayer if it is the equivalent of cash. Cowden v.
Commissioner, supra at 24. Not all promises received by a cash-
method taxpayer, however, are the equivalent of cash. E.g.,
Richardson v. Commissioner, 76 T.C. 512, 531-532 (1981) (notes
received for noncompetition fees), affd. 693 F.2d 1189 (5th Cir.
1982). The characteristics of a promise to pay that is the
equivalent of cash were described by the Court of Appeals for the
Fifth Circuit in Cowden:
We are convinced that if a promise to pay of a solvent
obligor is unconditional and assignable, not subject to
set-offs, and is of a kind that is frequently
transferred to lenders or investors at a discount not
substantially greater than the generally prevailing
premium for the use of money, such promise is the
equivalent of cash and taxable in like manner as cash
would have been taxable had it been received by the
taxpayer rather than the obligation. * * * [Cowden v.
Commissioner, supra at 24.]
Accord Estate of Silverman v. Commissioner, 98 T.C. 54, 61
(1992).
Petitioners have failed to prove that the obligation of
either Chef-Reddy or Offut Co. to make the Chef-Reddy payments is
a cash equivalent. Among other failures, petitioners have failed
to prove that either Chef-Reddy's or Offut Co.'s obligation to
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