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forbearance of money. Deputy v. du Pont, 308 U.S. 488, 498
(1940).
Whether a payment constitutes income when received depends
on the parties’ rights and obligations at the time that the
payment was made. Commissioner v. Indianapolis Power & Light
Co., 493 U.S. 203, 211 (1990). Whether a payment is either
includable in the gross income of the recipient or is not taxable
to the recipient (e.g., as a gift) must be reached on
consideration of all factors. See Commissioner v. Duberstein,
363 U.S. 278, 288, 292 (1960) (reversing Court of Appeals and
affirming the Tax Court, finding that a purported gift was a
recompense for past services or an inducement for the taxpayer to
be of further service in the future).
The payment lacks many of the traditional indicia of debt.
See Bergersen v. Commissioner, supra. Petitioner and Ms. Johnson
did not execute a note. As of the time of trial, petitioner had
not paid either principal or interest. Repayment was due upon
demand by Ms. Johnson, but she had not demanded payment of either
principal or interest. Petitioner lost contact with Ms. Johnson,
and petitioner was uncertain even how to locate Ms. Johnson at
the time of trial.
The $32,500 payment is reflected in petitioners’ records as
an income item with two other items of income received from FSZ.
Petitioner failed to provide the Court with a reasonable
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