Cleo Beatrice Baxter and Albert N. Baxter v. Commissioner of Internal Revenue Service

Albert Nathaniel Baxter (Baxter) and his wife, Cleo Beatrice Baxter, appeal the decision of the Tax Court upholding the Commissioner of Internal Revenue’s assessment of a deficiency in their 1978 tax return. We reverse in part and affirm in part.

The First Issue: The Constructive Receipt of Income

Baxter received in January 1979 a check for $13,095 from Peter J. Veith. The check was for commissions earned by Baxter in 1978. The check was dated December 30, 1978. The Tax Court held that Baxter had “constructively” received the $13,095 in 1978.

Although the notion of constructive receipt blends a factual determination of what actually happened and a legal assessment of its significance, we have held that a finding of constructive receipt is a finding of fact. Bennett v. United States, 293 F.2d 323, 326 (9th Cir.1961). As such, it can be set aside only if clearly erroneous. Anderson v. City of Bessemer, 470 U.S. 564, 575 , 105 S.Ct. 1504, 1512 , 84 L.Ed.2d 518 (1985). Clear error exists here.

The Tax Court properly put no weight on the fact that Veith reported the payment as a deduction in 1978 and the fact that Baxter originally reported the payment as 1978 income, only later…