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pertaining to deposits taxpayers received before the consummation
of a sale for real property are applicable to the case at hand
rather than those involving the claim of right doctrine.
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,
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