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that applies when payment has not been effected because
of the payee's postponing payment. The term
"constructive receipt" could also be used in its
vernacular sense for any payment not physically
received by the taxpayer. A taxpayer has “constructive
receipt”, in its vernacular sense, of funds paid
directly to the taxpayer's agents or creditors. The
legal doctrine of constructive receipt defined in sec.
1.451-2(a), Income Tax Regs., however, does not apply
to completed payments received by a payee's agents or
creditors. We have used the term "taxable receipt" to
distinguish between physical receipt and nonphysical
receipt that the law treats as received for tax
purposes.
Connecticut General placed no restrictions on petitioner's
use of the funds, and the payment was made to petitioner's
attorneys on petitioner’s behalf at petitioner's direction
pursuant to the settlement agreement. The Supreme Court has
observed that client and lawyer are in “a quintessential
principal-agent relationship” and that it is “appropriate to
treat the full amount of the recovery as income to the
principal.” Commissioner v. Banks, supra at 436. Petitioner's
counsel was acting as petitioner's agent and petitioner's
creditor in receiving and holding the funds. Settlement proceeds
paid by Connecticut General in 2002 constitute income to
petitioner in 2002. Petitioner thus had taxable receipt of the
income in 2002. See Gale v. Commissioner, supra; see also
Sullivan v. Commissioner, T.C. Memo. 1999-341.
Citibank Interest Income
Gross income means all income from whatever source derived.
Sec. 61(a). Under section 61(a)(4), interest is includable in
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