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to properly structure a trust for the receipt of the tuition
payments is especially difficult to excuse because he is an
attorney and law professor and taught trust law for the LECC
review courses. Petitioner’s arguments, which are addressed
below, that he was contractually obligated to create an
escrow/trust and, in fact, created a trust with the guaranteed
tuition are without merit.
Taxpayers who use the cash method of accounting, such as
petitioners in this case, must report income when it is actually
or constructively received. Sec. 451(a); sec. 1.451-1(a), Income
Tax Regs. Income is constructively received by a taxpayer when
it is "credited to his account, set apart for him, or otherwise
made available so that he may draw upon it at any time". Sec.
1.451-2(a), Income Tax Regs. Where the taxpayer’s control of the
receipt of income is subject to substantial limitations or
restrictions, the income is not constructively received by the
taxpayer. Sec. 1.451-2(a), Income Tax Regs. The doctrine of
constructive receipt requires taxation of income that is subject
to a taxpayer’s unfettered command and that the taxpayer is free
to enjoy at his own option even though he chooses not to.
Corliss v. Bowers, 281 U.S. 376, 378 (1930). Petitioners have
the burden of establishing that they did not have actual or
constructive receipt of the $30,000 in tuition from the winter
1992 guaranteed course. Rule 142(a).
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