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(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. * * *
Consequently, a cash method taxpayer constructively receives
income as of the date that a check is received absent a
substantial limitation. Furstenberg v. Commissioner, 83 T.C.
755, 791 n.28 (1984); Kahler v. Commissioner, 18 T.C. 31, 34-35
(1952); Roberts v. Commissioner, T.C. Memo. 2002-281. In the
instant case, the record reflects that the original check was not
subject to substantial limitations, and petitioner makes no
contention otherwise. Consequently, we find that petitioner
constructively received $10,841.06 of income upon his receipt of
the original check in 2001.4 Accordingly, petitioner’s 2001
gross income includes the IRA distribution of $10,841.06.
Petitioner’s reliance on Georgia commercial statutes and
related caselaw is misplaced. While State law creates legal
interests and rights, it does not override the Federal doctrine
4Petitioner was also in actual receipt of the check, which
we have held to constitute a cash equivalent. In Martin v.
Commissioner, T.C. Memo. 1992-331 (citing Lavery v. Commissioner,
158 F.2d 859, 860 (7th Cir. 1946), affg. 5 T.C. 1283 (1945)),
affd. 987 F.2d 770 (5th Cir. 1993), we stated: “The receipt of a
check is tantamount to the receipt of cash, even if the check is
not deposited or otherwise negotiated, provided that its receipt
is not subject to <substantial limitations’ and there is no
reason to suppose that it will be dishonored,”
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Last modified: May 25, 2011