Taxation
Ca. Tax Lawyer 2017, VOLUME 26, NUMBER 1
Content
- 2016 Annual Meeting of the California Tax Bar & California Tax Policy Conference Report
- Bar Business
- Charles Moll Honored With the 2016 Benjamin F. Miller Award
- Contents
- Gap Between Tax and Sanctions Law Blocks Lifesaving Aid
- Honorable Marshall Whitley (Ret.) Honored With the 2016 Joanne M. Garvey Award
- Legislative Proposal for Infusing Guaranteed Fairness in Tax Administration by Allowing Partial Prepayment Judicial Review of Ftb-proposed Personal Income and Franchise Tax Deficiencies
- Masthead
- Message from the Chair
- Nathan Hochman Honored With the 2016 V. Judson Klein Award
- Proposal to Permit Liability Netting for Partnerships Subject to Involuntary Conversion
- Separation of the Sections from the State Bar
- Taxation Section 2016-2017 Leadership Directory
- The 2016 Benjamin F. Miller Award Acceptance Speech
- The 2016 Joanne M. Garvey Award Acceptance Speech
- Visiting the Committees
- Constructive Receipt Tax Rules Every Lawyer Should Know
Constructive Receipt Tax Rules Every Lawyer Should Know
By Robert W. Wood1
Constructive receipt is a fundamental tax concept that can have a broad and frightening impact. According to the Internal Revenue Service ("IRS"), you have income for tax purposes when you have an unqualified, vested right to receive it. Asking for payment later does not change that.2 The idea is to prevent taxpayers from deliberately manipulating their income.
The classic example is a bonus check available in December, but which the employee asks to hold until January 1. Normal cash accounting suggests that the bonus is not income until paid. The employer tried to pay in December, and made the check available. That makes it income in December, even though it is not collected until January.
Constructive receipt is an issue only for cash method taxpayers like individuals. Accrual basis taxpayers (like most large corporations) have constructive receipt built into the accrual method. The accrual method says you have income when all events occur that fix your right, if the amount can be determined with reasonable accuracy.3