- 8 -
in excluding from gross income the amounts that should have been
reported on the form; see, e.g., Neely v. Commissioner, 85 T.C.
934, 952 (1985); Fairchild v. Commissioner, T.C. Memo. 2001-237;
Rivera v. Commissioner, T.C. Memo. 1994-625; Vaughn v.
Commissioner, T.C. Memo. 1992-317, affd. without published
opinion 15 F.3d 1095 (9th Cir. 1993). Petitioner has failed to
show that the settlement proceeds fall within the purview of any
provision of the Code or of law excluding them from gross income.
Therefore, the $12,500 that he actually received from Mr. Davis
is includable in his gross income.
We now address the $2,500 settlement payment to which
petitioner was entitled, but which he never actually received.
A taxpayer who reports income under the cash method of
accounting must report income for the taxable year when actually
or constructively received. Sec. 1.451-1(a), Income Tax Regs.
Income * * * is constructively received by * * * [a
taxpayer] in the taxable year during which it is
credited to his account, set apart for him, or
otherwise made available so that he may draw upon it at
any time, or so that he could have drawn upon it during
the taxable year if notice of intention to withdraw had
been given. However, income is not constructively
received if the taxpayer’s control of its receipt is
subject to substantial limitations or restrictions. * *
*
Sec. 1.451-2(a), Income Tax Regs. Under the constructive-
receipt doctrine, a taxpayer recognizes income when the taxpayer
has an unqualified, vested right to receive immediate payment.
Martin v. Commissioner, 96 T.C. 814, 823 (1991). “Generally,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011