Fink v. New York State Tax Commission , 346 N.Y.S.2d 611 ( 1973 )

Reynolds, J.

Proceeding pursuant to CPLR article 78 (transferred to the Appellate Division of the Supreme Court in the Third Judicial Department by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the State Tax Commission, which denied the petitioner a refund for an alleged overpayment of his 1959 income tax.

The question posed in this proceeding is whether the respondent correctly held that some $39,354.85 in executor’s commissions actually paid to petitioner in January of- 1959 should properly have been included as income on petitioner’s 1959 State income tax return. Petitioner’s position is that, since the Surrogate’s final order was signed and entered in December of 1958 and the funds were concededly available in cash to pay him immediately thereon, the entire estate having been reduced to cash, the. commissions were actually 1958 income under the doctrine of constructive receipt.

The doctrine of constructive receipt has a long and solid foundation in both State and Federal tax regulations (Regulations of the Department of Taxation and Finance, 20 NYCRR 252.20 [formerly Personal Income Tax Regulation, § 44] ; Treas. Reg., § 1.451-2). Moreover, the doctrine of constructive receipt is not invoked at the discretion of either the government or the taxpayer, but is a mandatory rule (Well v. Commissioner of Internal Revenue, 173 F. 2d 805, cert. den. 338 U. S. 821; Ross v. Commissioner of Internal Revenue, 169 F. 2d 483). It is also well settled that the doctrine applies to both cash and accrual basis taxpayers (United States v. Hancock Bank, 400 F. 2d 975, 978, citing North American Oil Cons. v. Burnet, 286 U. S. 417). The respondent contends that, under the landmark case of Weil v. Commissioner of Internal Revenue (supra), the doctrine of constructive receipt is inapplicable to the instant ease and further contends that section 359 of the Tax Law and sections 43 and 44 of the now superseded Personal Income Tax Regulations (now Regulations of Department of Taxation and Finance, 20 NYCRR 252.19, 252.20) preclude consideration of the commissions as income at any time other than when received. We cannot agree.

In Weil v. Commissioner of Internal Revenue (supra, p. 808) the court said that the applicability of the constructive receipt doctrine depended upon whether a commission was “ a credit of iiiooinO * may be drawn upon by hitó [the taxpayer] at any time ’ and ‘ without any substantial limitation or restriction as to the time or manner of payment ’ ” and, thus, held the constructive receipt to be inapplicable there because the judicial decrees had left the time of payment to the discretion of the executors and there were a number of factors to be considered in exercising that discretion in the best interest of the estate. The court then concluded ‘ * consequently until the executors do something to indicate that their discretion has been exercised in favor of immediate payment to their personal accounts, they do not in their individual capacities have unrestricted control of the money..’ ’

Here, unlike in Weil, all of the assets of the estate had been reduced to cash and the Surrogate’s decree had fixed the disposition of the entirety of that cash. There was, therefore, no longer any room for the exercise of the discretion of the executors in the interest of the estate. In light of the uncontroverted testimony that the bank would have paid the petitioner his commission on demand at any time after December 17, 1958, the absence of a specific date and specific amount of the peti- . tioner’s individual commission must be viewed as insignificant. There was no limitation or restriction on the petitioner’s access to the commission after the entry of the Surrogate’s decree of December 17,1958 and it must be, therefore, viewed as being constructively received by the peititioner as of that date. We find no other basis advanced to preclude the applicability of the- doctrine here and thus the determination of the respondent must be reversed.

The determination should be annulled, and the petition granted, with costs.