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Fortune's Fate
On February 22, 2005 U.S. District Court in Washington, D.C. decided the case of Augustin B. Jombo v. Commissioner of Internal Revenue Service. The decision further clarifies the concept of constructive receipt of income in the United States income tax code.
In 1989 Mr. Jombo, then a clerk at the Nigerian Consulate in New York , won a $26 million lottery jackpot. New York state law at the time prohibited lump sum payouts and Mr. Jombo won the right to receive $1.2 million a year for 20 years. In 1996, Mr. Jombo, who had since become a permanent U.S. resident and a cash account method tax payer, contested the inclusion of the $1.2 million payment in his annual income. He claimed the full $26 million was constructively received in 1989 when he still had diplomatic tax status. The court, unconvinced, found that the date of constructive receipt could not be considered 1989, as the winnings were still subject to substantial constraints preventing him from drawing on the income. Additionally, the court relied on 26 C.F.R. 1.446-1 (c) (1) (1) which states that all income received constructively or actively in a year is taxable as gross income. The court ruled that the annual payments of $1.2 million were gambling winning which could be taxed annually as part of gross income.
- by Sally Laing, legal assistant, Berliner, Corcoran & Rowe, LLP in Washington.
Thu, / Embassy Law Link