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OPINION
A. Whether the Payments at Issue Are Taxable to Petitioner in
the Years Received
1. Contentions of the Parties
The parties dispute whether the payment to petitioner for
the stock buyout and related interest are taxable to petitioner
in 2000 and 2001. Petitioner contends that those amounts are not
taxable in those years because of the claim of right doctrine.
Respondent disagrees.5 We agree with respondent.
Income includes all economic gains not specifically exempted
from taxation. See sec. 61; Commissioner v. Glenshaw Glass Co.,
348 U.S. 426, 429 (1955). Income is generally taxable in the
year in which the taxpayer receives it unless, under the method
of accounting used by the taxpayer, the amount is properly
taxable in another year. Sec. 451(a). For taxpayers using the
cash method of accounting, income is taxable in the year actually
or constructively received. Sec. 1.451-1(a), Income Tax Regs.
Under the claim of right doctrine, a payment is includable
in income in the year in which a taxpayer receives it under a
claim of right (even if that claim is disputed by another party)
5 Income generally includes proceeds of a stock sale (less
a taxpayer’s basis) and interest on money received. Secs.
61(a)(3), (4), 1001. Respondent contends that petitioner
received income in the amount of the gross proceeds less his
basis in the stock, plus all of the interest credited to the
account in which he had deposited that payment.
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Last modified: May 25, 2011