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amount is to be properly accounted for in a different period.
Sec. 451(a). For a taxpayer using the cash receipts and
disbursement method of accounting, an item is includable in gross
income when it is actually or constructively received. Sec.
1.451-1(a), Income Tax Regs. Income although not actually
reduced to a taxpayer’s possession is constructively received in
the taxable year during which it is credited to the taxpayer’s
account, set apart for him, or otherwise made available so that
he may draw upon it at any time. Sec. 1.451-2(a), Income Tax
Regs. 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.
Generally, interest credited on savings bank deposits is income
in the taxable year when credited. Sec. 1.451-2(b), Income Tax
Regs.
Petitioners argue that no part of the interest credited to
their accounts is taxable to them in 2000 because they did not
actually receive the interest in hand, and they did not withdraw
any of the interest earned. Petitioners further argue that they
do not have control of the interest because the bank has sole
access to the interest until petitioners actually receive the
interest in hand or check. Petitioners’ arguments are without
merit.
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Last modified: May 25, 2011