However, he indicated that he would pay the balance on the original date of maturity if the corporation requested it. In consideration for the extension, Boccardo offered to pay interest on the principal amount at the rate of 9 percent per year, saying he would rather pay interest to a company that he partially owned than a third-party bank.
On Nov. The Tax Court considered two principal issues. First, did the corporation constructively receive the principal amount of the note? Second, was the corporation able to collect the principal amount of the note at the time it was originally due?
Moreover, the court found that while Boccardo discussed extending his note with the board prior to the due date, the court was not completely persuaded that an agreement to extend the due date existed prior to the vote. Accordingly, the court concluded that although "a taxpayer may effectively defer for tax purposes receipt of income payable pursuant to an agreement by entering into a superseding agreement prior to the time the income is due pursuant to the terms of the original agreement," this treatment does not apply in this case because an agreement to defer payment of the note was not made until the corporation had the right to receive the income.
Thus, the corporation was treated as constructively receiving the principal amount of the note during , which the corporation then re-advanced to Boccardo.
In any case when the rate of earnings payable in respect of such a deposit or account depends on the amount of notice of intention to withdraw that is given, earnings at the maximum rate are constructively received during the taxable year regardless of how long the deposit or account was held during the year or whether, in fact, any notice of intention to withdraw is given during the year.
However, if in the taxable year of withdrawal the depositor or account holder receives a lower rate of earnings because he failed to give the required notice of intention to withdraw, he shall be allowed an ordinary loss in such taxable year in an amount equal to the difference between the amount of earnings previously included in gross income and the amount of earnings actually received.
See section and the regulations thereunder. Amounts payable with respect to interest coupons which have matured and are payable but which have not been cashed are constructively received in the taxable year during which the coupons mature, unless it can be shown that there are no funds available for payment of the interest during such year.
Dividends on corporate stock are constructively received when unqualifiedly made subject to the demand of the shareholder. For example, if you receive property, services, or securities as a form of payment, those must be accounted for at fair market value—so long as there are no restrictions on the payment and it qualifies as constructive receipt.
Constructive receipt is a concept that describes the moment at which income must be taken, for both tax and accounting purposes. Constructive receipt is especially important to consider for transactions that fall toward the end of a year because it could affect which tax year the income is taxed in.
Constructive receipt applies only to cash accounting situations. Most people and many businesses use cash accounting, so constructive receipt is an important concept for most people to understand.
However, some businesses use accrual accounting , and constructive receipt doesn't apply in these cases. For a payment to qualify as constructive receipt, the Internal Revenue Service IRS says that the recipient must have no restrictions on the payment received.
For example, if you receive stock from your employer with the stipulation that you can't sell the stock for six months, the stocks aren't yours—as far as constructive receipt is concerned—until you can sell the stock at will. The stock may be your property immediately, but it doesn't count as income until you can use it as you see fit. If you receive a check and you don't deposit it, it's still under your control you can choose to deposit it any time , so it counts as income.
Conversely, if you deposit a check, and the bank puts a hold on it, it's not under your control there are restrictions on the funds , so you don't have control over it and it doesn't count as income. Dividends are a good example of when an average person may encounter more complicated constructive receipt situations. That's because three important dates occur in the process of giving dividends to shareholders:.
Of these three dates, the dividend payment date is the one that counts, when it comes to constructive receipt. Glossary Constructive Receipt Related Content. A tax doctrine that applies to cash basis taxpayers and provides that an unrestricted right to receive income is treated the same as actually receiving it. The doctrine prevents a taxpayer from deliberately delaying the receipt of income so that he can control the year in which he reports it for income tax purposes.
0コメント