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withdrawal. Petitioners, however, did not withdraw any of the
interest credited to these accounts.
Petitioners timely filed a joint Federal income tax return
for 2000 using the cash basis method of accounting. On their
return, petitioners reported only that they received $19 of
interest income from Sterling Savings Bank. Petitioners did not
report any interest income from Washington Mutual or from the CD
accounts.
In the notice of deficiency, respondent determined that
petitioners received unreported interest income from Washington
Mutual and from the CD accounts.
Petitioners timely filed a petition with this Court
challenging the notice of deficiency. In the petition,
petitioners state: “The interest in question was not paid or
received by us.”
Discussion7
Generally, interest received by or credited to the taxpayer
constitutes gross income and is fully taxable. Sec. 61(a)(4);
sec. 1.61-7(a), Income Tax Regs. An item of gross income shall
be included in income in the taxable year when received by the
taxpayer unless under the taxpayer’s method of accounting the
7 The facts are not in dispute, and the issue is
essentially one of law. Therefore, sec. 7491, concerning burden
of proof, has no bearing on this case. See Higbee v.
Commissioner, 116 T.C. 438 (2001).
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