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We turn first to the tax consequences for the year at issue
that are attributable to Mr. Enyart’s receipt of the B&L equip-
ment in return for his covenant not to compete with B&L.4 As
framed by petitioners in both their opening and reply briefs, the
issue that we must decide with respect to Mr. Enyart’s covenant
is:
What amount must Petitioners report as gross income for
various equipment received pursuant to a covenant not
to compete agreement wherein Petitioners received the
“right to use” such equipment that was 100% encumbered
by financing for which Petitioners were not liable?
Having so framed the issue in this case relating to the B&L
equipment, most of petitioners’ opening and reply briefs nonethe-
less advance contentions and arguments in support of petitioners’
position that Mr. Enyart did not constructively receive the B&L
equipment during the year at issue within the meaning of section
1.451-2(a), Income Tax Regs. According to petitioners,
the mere receipt of the [B&L] equipment transferred
pursuant to the covenant not to compete which was
encumbered by substantial debt for which Petitioners
were not liable constitutes a substantial restriction
thereby disallowing the envokement [sic] of the con-
structive receipt doctrine.
The constructive receipt doctrine addresses when income,
although not actually reduced to a taxpayer’s possession, is
constructively received by the taxpayer. See sec. 1.451-2(a),
4Petitioners concede that any income that they have for the
year at issue which is attributable to the B&L equipment is
ordinary income, and not capital gain as reported in their joint
return.
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