Ferydoun Ahadpour, A.K.A. F. Ahadpour, and Doris Ahadpour - Page 15

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          remainder of the purchase price and when petitioners delivered              
          the executed deed conveying title to Phase II in fee simple to              
          CDC.  If the sale was not consummated, section 6(c)(ii) of the              
          Agreement fixed petitioners’ right to retain the deposits only if           
          CDC breached.                                                               
               Respondent argues that the claim of right doctrine applies             
          and the deposits received by petitioners should be included in              
          their gross income in the year received.  The Supreme Court case            
          North Am. Oil Consol. v. Burnet, 286 U.S. 417 (1932), established           
          the elements of the claim of right doctrine.  The three basic               
          elements are:  (1) The taxpayer receives money or property, (2)             
          under a claim of right, and (3) the taxpayer has control over the           
          use or disposition of the money or property.  Id. at 424.                   
          Amounts received under a claim of right, without restriction as             
          to their disposition, are taxable when received even though the             
          taxpayer may have a contingent obligation to restore the funds at           
          some future point.  Id.                                                     
               It is clear that petitioners received the deposits to which            
          they were entitled under the Agreement, and that they exercised             
          control over the use and disposition of those deposits.  However,           
          we conclude that the claim of right doctrine does not apply to              
          the instant case.  Petitioners received the amounts pursuant to             
          the Agreement for the sale of real property.  Therefore, cases              

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