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conduit.” Diamond v. Commissioner, 56 T.C. 530, 541 (1971),
affd. 492 F.2d 286 (7th Cir. 1974). Receipts subject to the
taxpayer’s claim of right are includable in the taxpayer’s income
in the year of receipt. N. Am. Oil Consol. v. Burnet, 286 U.S.
417, 424 (1932). A taxpayer has a claim of right to income if
the taxpayer: (1) Receives the income; (2) has control over the
utilization and disposition of the income; and (3) asserts a
“claim of right” or entitlement to the income. Id. at 424.
Over the course of the examination, petitioners maintained
several different positions with respect to ISOA, Inc.’s
treatment of the licensing fees as “deferred income”. In 1997,
petitioners’ original position with respect to the “deferred
income” was that the amount was being “held for payment of $1.5
million buyout of intellectual property” from the University.
Later, in August 2000, petitioners maintained the position that
the “deferred income” represented accumulated royalties owed to
the inventors of the underlying intellectual property. At trial,
Ms. Stephenson also testified that the licensing fees were
treated as “deferred income” because they were subject to being
refunded to the licensees. We also note that, on August 1, 2000,
just prior to respondent’s notice of deficiency sent on October
19, 2000, Ms. Stephenson stated that ISOA, Inc., was actually an
accrual basis taxpayer and that the proper accounting treatment
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