Ferydoun Ahadpour, a.k.a F. Ahadpour and Doris Ahadpour - Page 15






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               Respondent contends that, since the money was directly                 
          released to petitioners for their use, the amounts should be                
          included in gross income when received.  However, in Kang v.                
          Commissioner, supra, the earnest money was deposited into the               
          taxpayers’ personal checking account.                                       
               Additionally, respondent contends that petitioners were                
          under a contingent liability to repay the funds to CDC, and that            
          to avoid application of the claim of right doctrine, the                    
          recipient must recognize in the year of receipt an existing and             
          fixed obligation to repay the amount received and must make                 
          provisions for repayment.  Hope v. Commissioner, 55 T.C. 1020,              
          1030 (1971), affd. 471 F.2d 738 (3d Cir. 1973).  A restriction on           
          the disposition or the use of the funds may also prevent the                
          application of the claim of right doctrine.  Commissioner v.                
          Indianapolis Power & Light Co., 493 U.S. 203, 209 (1990).                   
               We do not find that petitioners were merely under a                    
          contingent obligation to repay the deposits to CDC as respondent            
          contends.  There was an existing and fixed obligation for                   
          petitioners to repay the deposits in the event that they breached           
          or “for any other reason other than a default by Buyer”.  Indeed,           
          petitioners did repay an amount close to the amount CDC deposited           
          upon execution of the Mutual Release.  Petitioners did not have             
          an unconditional right to retain the deposits.  Bourne v.                   
          Commissioner, supra at 649.                                                 
               The cases that respondent relies on pertain to items that              
          would normally be included in income upon receipt even though it            

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