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principle that a taxpayer does not escape taxation on what is
otherwise the taxpayer’s income merely because the income was
paid directly to the taxpayer’s creditor. Helvering v. Horst,
311 U.S. 112 (1940); Parkford v. Commissioner, 133 F.2d 249, 251
(9th Cir. 1943).7
Furthermore, we think it appropriate to note that, contrary
to petitioner’s arguments, the above-described bankruptcy
proceedings are, for the most part, irrelevant. The bankruptcy
court did not focus on the nature of the reward as an item of
income but rather as an asset available as a source of payment to
petitioner’s creditors. See Parkford v. Commissioner, supra at
251.
Similarly, petitioner’s reliance on Cold Metal Process Co.
v. Commissioner, 17 T.C. 916 (1951), affd. per order 53-1 USTC
par. 9135 (6th Cir. 1952), Barnette v. Commissioner, T.C. Memo.
1992-371, affd. without published opinion 41 F.3d 667 (11th Cir.
1994), Stone v. Commissioner, T.C. Memo. 1984-187, Collins v.
Commissioner, T.C. Memo. 1972-170, and Hannaford v. Commissioner,
7 Curiously, and if only by implication, petitioner
recognizes this principle as she argues in the alternative that
to the extent that the reward is includable in her income, it
should be includable in her 1998 income because that was the year
Proulx’s lien arose. A creditor’s collection rights against a
taxpayer’s property, however, say little about when a cash basis
taxpayer realizes income.
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