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A taxpayer reporting income on the cash method of accounting,
such as petitioner, must include all income items in gross income
for the taxable year in which the item is actually or
constructively received. See sec. 451(a); Ames v. Commissioner,
112 T.C. 304 (1999); sec. 1.451-1(a), Income Tax Regs. Income is
considered to be constructively received in the taxable year during
which it is credited to the taxpayer's account, set apart for him,
or otherwise made available so that he may draw upon it at any
time. See sec. 1.451-2(a), Income Tax Regs. However, income is not
constructively received if the taxpayer's control of its receipt is
subject to substantial limitations or restrictions. See id.
In the instant case, the check for the award and interest was
received on November 6, 1989, by petitioner, his guardian ad litem,
and his attorney. At that time, petitioner was legally entitled to
both the judgment award and interest. Shortly thereafter petitioner
endorsed the check. The placing of the proceeds of Continental's
check into escrow accounts does not alter petitioner's entitlement
to the check for the proceeds, which he received and endorsed in
1989. Rather, the placing of the proceeds in escrow was to secure
payment of petitioner's obligations.
The constructive receipt doctrine is concerned with the
receipt of the proceeds from the payor, not the subsequent
disposition of the proceeds by the payee. In the instant case, the
escrow accounts only limited petitioner's disposition of the
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