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Under the economic-benefit theory, an individual on the cash receipts and disbursements method of accounting is currently taxable on the economic and financial benefit derived from the absolute right to income in the form of a fund which has been irrevocably set aside for him in trust and is beyond the reach of the payor's debtors. E. T. Sproull, 16 T.C. 244 (1951), affd. per curiam 194 F.2d 541 (6th Cir. 1952). 


In the Sproull case the employer-corporation unilaterally and irrevocably transferred $10,500 into a trust in 1945 for taxpayer's sole benefit in consideration for prior services. In 1946 and 1947, pursuant to the trust document, the corpus was paid in its entirety to taxpayer. In the event of his death the funds were to have been paid to his administrator, executor, or heirs. The Court held that the entire $10,500 was taxable in 1945 because Sproull derived an economic benefit from it in 1945. The employer had made an irrevocable transfer to the trust, relinquishing all control. Sproull was given an absolute right to the funds which were to be applied for his sole benefit. The funds were beyond the reach of the ...

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