Constructive Receipt

Thanks for sharing!
Constructive ReceiptImage source: openclipart.org

As a general rule, for tax purposes your income includes all the income you actually or constructively receive during the tax year.

“Constructive receipt” means income is available to you without restriction. An example is when your bank pays interest on your checking account by depositing an amount in your account that you can use when you choose. Even if you do not take the interest out of the account, you have constructively received it, and the interest is reportable as income on your tax return in the year the bank deposits it in your account.

Income is not constructively received in situations when your control is subject to substantial restrictions or limitations. For instance, say you own a certificate of deposit that matures in a year or less, and you’re required to forfeit three months of interest if you close the account before maturity. If the CD spans two of your taxable years (as in a six month CD taken out in September and maturing in March), and the bank credits your account for interest earned but not yet withdrawn, you may not have constructive receipt of that interest. [See Federal Tax Regulation 1.451-2.]

***

Other posts you might enjoy

Definitions — Curtailing the number Image source: openclipart.org   Voluntary truncation hardly sounds like an enjoyable pastime. But cutting off part of taxpayer identification numbers may be a way to reduce identity theft. Back in 1936, when the Social Security Board created the nine-digit social security number to id...
Definitions — Not so strictly confidential Image source: Public domain via Wikimedia Commons   You've probably heard the old joke about life's two rules. The first one is to never give out all the information. That's a rule the IRS follows and most of the time you're probably happy they do. But for identity theft victims, the ...
Definitions — Paying the piper Image source: Edmund Evans, Public domain, via Wikimedia Commons   Whether you believe the expression comes from the Pied Piper of legend or the old proverb, paying the piper does not always mean you get to call the tune. Sometimes the one who makes the rules gets to choose the music. Th...
Definition — Fun with statistics Image source: openclipart.org Keep calm, it's only statistics, and according to author Rex Stout, there are only two kinds – the kind you make up and the kind you look up. The IRS generates statistics (presumably of the second kind) at a heady pace, and the Spring 2017 Statistics of Income Bulle...
Posted in Taxing Definitions Tagged with: , , ,