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Section 451(a) provides the general rule that “any item of
gross income shall be included in the gross income for the
taxable year in which received by the taxpayer, unless, under the
method of accounting used in computing taxable income, such
amount is to be properly accounted for as of a different period.”
Petitioner, who reports this type of income on the cash method,
must report income in the year it is actually or constructively
received. See sec. 1.451-1(a), Income Tax Regs. We agree with
petitioner that a check mailed on December 10, 1996, would likely
have been received by petitioner during 1996 and thus be
includable in 1996 income.
With respect to the $165 check, respondent contends that the
insurance recovery relates to a claim made by Cigarette City, a
company owned by petitioner’s children. Petitioner contends that
he reimbursed Cigarette City for the amount of the check.
Petitioner, however, has not provided any credible evidence other
than his own self-serving testimony that the reimbursement
occurred. Accordingly, we hold that petitioner underreported his
insurance reimbursement income by $165.
VI. Accuracy-Related Penalties Under Section 6662 for Negligence
or Disregard of the Rules or Regulations
Section 6662 provides for a 20-percent penalty on any
understatement of tax attributable to negligence or disregard of
the rules or regulations, or any substantial understatement of
income tax. Pursuant to section 6662(c), negligence includes any
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