Cliff Connors - Page 20

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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                        
               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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