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On brief, petitioners request that they either be permitted
to elect the limitation provisions of section 86(e) for the lump-
sum benefits paid in 1996 or that they be permitted to refund the
amounts actually paid to them by the Social Security
Administration. The election provisions of section 86(e), even
if petitioners were able to perfect such an election, would do
nothing to limit petitioners’ tax liability. Respondent’s
determination of the deficiency in petitioners’ 1996 tax year
resulted from the inclusion of only $12,932 of Social Security
benefits, which are the benefits reported as attributable to
1996.
Petitioners’ alternative request likewise affords them no
relief. Taxpayers reporting income on the cash method of
accounting, such as petitioners, must include an item in income
for the taxable year in which the item is actually or
constructively received. See sec. 451(a). Petitioners may not
retroactively erase the receipt of income in 1996 and 1997 by
refunding it in a subsequent tax year. See Simon v.
Commissioner, 11 T.C. 227, 231-232 (1948); see also Commissioner
v. Gaddy, 344 F.2d. 460 (5th Cir. 1965), affg. in part and
remanding in part 38 T.C. 943 (1962); Florida Progress Corp. &
Subs. v. Commissioner, 114 T.C. 587, 598 (2000)(discussing claim
of right doctrine). We thus confine our consideration of
petitioners’ tax liability to the specific facts presented.
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