Williams v. Commissioner 28 T.C. 1000 (Tax Ct. 1957) In 1951, Williams provided services to McConkey and Housley. In return they gave him a promissory note for $7166, payable in 240 days. A promissory note is pretty much the same as an IOU, with a date payable included. Williams tried to sell the promissory note, but couldn't find a buyer. McConkey and Housley didn't have the money to pay until three years later when they settled for $6666. Williams reported the $6666 as gross income as part of his 1954 taxes, but he didn't include it as income on his 1951 taxes. The IRS disagreed and assessed a deficiency. The IRS argued that the receipt of the promissory note constituted taxable income in 1951. Williams argued that he didn't actually get the money until 1954, so it shouldn't be taxed until that year. Williams argued that the promissory note wasn't a payment, it was just evidence that McConkey and Housley owed him money. The Tax Court found for Williams. The Tax Court found that the promissory note was not payment, but only evidence of indebtedness. The Court noted that Williams tried to sell the promissory note, but couldn't find a buyer. That was evidence that the note had no fair market value. The Court noted that even if the promissory note counted as a payment, Williams couldn't have collected his money for 240 days, which would have been in 1952, so the income should not have been included in his 1951 income anyway.