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the earnings are used to pay an obligation of the taxpayer. See
Tucker v. Commissioner, 69 T.C. 675, 678 (1978); Chambers v.
Commissioner, T.C. Memo. 2000-218, affd. 17 Fed. Appx. 688 (9th
Cir. 2001); sec. 1.61-12(a), Income Tax Regs. A third party’s
payment of an obligation of the taxpayer is equivalent to the
taxpayer’s receipt of the income in the amount paid. See Old
Colony Trust Co. v. Commissioner, 279 U.S. 716, 729-730 (1929);
Minor v. Commissioner, T.C. Memo. 1998-237. Where the transfer
of funds at least partially discharges a legal obligation of the
taxpayer, the transfer is equivalent to receipt by the taxpayer.
See Helvering v. Horst, 311 U.S. 112, 116 (1940); Chambers v.
Commissioner, supra. The fact that the transfer is involuntary,
such as by garnishment, has no significance. Chambers v.
Commissioner, supra; Vorwald v. Commissioner, T.C. Memo. 1997-15.
Thus, the $15 is includable in petitioners’ gross income.
Petitioner appears to argue that the above rule is
inapplicable because Farmers eventually acknowledged that
petitioner did not owe the company any money. Thus, petitioner
contends, the $15 did not discharge a legal obligation but
instead was wrongfully withheld. Petitioner did not introduce
credible evidence to support this contention, however, nor did he
otherwise demonstrate the $15 is excludable from gross income.
Accordingly, petitioner has failed to prove that respondent’s
determination is erroneous. We therefore conclude the $15 is
includable in petitioners’ gross income.
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