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Menard. Consequently, Mr. Menard is liable for tax on the full
amount of the excess TMI expenses, $1,619,918.
V. Constructive Receipt of Interest Income
Respondent alleges that in 1998 Mr. Menard constructively
received interest income in the amount of $639,302 from loans Mr.
Menard made to Menards. On its tax return for TYE 1998, Menards
deducted the accrued interest but did not issue a check to Mr.
Menard until January 29, 1999. After receiving the check, Mr.
Menard reported the interest income on his 1999 tax return.
Respondent contends that Mr. Menard should have reported the
interest income in 1998 for the following reasons: (1) Menards
had credited the interest income to Mr. Menard’s account, making
it available for Mr. Menard’s use during 1998, and (2) as
president, Mr. Menard had the authority to demand payment of the
accrued interest at any time.
Section 61(a)(4) includes interest in a taxpayer’s gross
income. Section 1.451-2(a), Income Tax Regs., provides:
(a) General rule. Income although not actually reduced
to a taxpayer’s possession is constructively received
by him 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. * * *
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