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With respect to the remaining $30,000 in unreported net
income determined by respondent, petitioners contend that they
were not required to report $30,000 of tuition from LECC’s winter
1992 guaranteed review course that was deposited into the Sanwa
account during 1991. The guaranteed students paid the tuition in
1991, and the tuition was refundable to students in 1992 if they
failed the bar examination. Petitioner contends that there were
substantial restrictions on his receipt of the tuition during
1991 because (1) he was required by the LECC contract with the
guaranteed students to place the $30,000 tuition into a set-aside
escrow account until the students passed the bar; and,
(2) pursuant to the contract, he established a trust account at
World Savings for deposit of the refundable tuition. In this
regard, petitioner argues that the guaranteed tuition should not
be reported as income until the guaranteed students passed the
bar examination.
Petitioner, however, failed to establish a trust, either in
form or in substance, for the guaranteed tuition. Petitioner
deposited $50,000 into a savings account at World Savings;
however, he was not required to do so by LECC's guaranty
agreement with the students. Rather, petitioner personally chose
to put money in the World Savings account and could have decided
to withdraw and spend the money at any time without restriction
or recourse from the guaranteed students. Petitioner’s failure
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