Walter used the cash method to account for income from his cattle ranch. During an audit in year 3, the IRS auditor discovered a document from a customer indicating that Walter sold 115 head of cattle to the customer two years earlier for $77,000.

The document appeared to be a tear slip, the top half of a document that normally includes a business check. Walter’s bank records for year 1 showed no such deposit, and a conversation with the customer revealed that its check for $77,000 had never been cashed. A new check was issued in year 3.

Walter included the $77,000 as income on his year 3 tax return. The IRS then issued an audit report contending that the income was taxable in year 1 under the doctrine of constructive receipt. If you were a tax court judge hearing this case, how would you rule?