An employee who agrees prior to earning income that the income will be paid in a later period does net have constructive receipt
of the income, as the Department properly acknowledged in its 1999 Opinion.
The court determined the Sinyards were in constructive receipt
of the money paid to Winthrop & Weinstine.
There is no constructive receipt
if the taxpayer's control is subject to substantial limits or restrictions.
Under the principle of constructive receipt
, if the employer gives the employee a choice between tax-free benefits and cash or another taxable benefit, the employee must pay income tax on the cash (or the value of the other taxable benefit).
10) Taxation is deferred so long as the employee is not in constructive receipt
(a meaningful concept only to a cash-basis taxpayer) means: If a taxpayer has it or can get his or her hands on it, it is taxable.
The IRS could consider the benefit exchange a taxable event if it violates the doctrines of constructive receipt
, economic benefit or assignment of income.
If the allowance were available to the retiree in the earlier year, the issue would be one of constructive receipt
and would be considered to have received it and be taxable on it in the year it was accrued.
of income is often successfully argued by the IRS to accelerate the recognition of income.
She said conforming 403(b) plan rules with 401(k) rules for amounts earned but not yet available would be difficult because they take into account constructive receipt
regulations that apply throughout the code.
Specifically, to defer taxation to the employee of the promised but unpaid sums, a nonqualified deferred compensation plan must comply with the separate but related tax doctrines of constructive receipt
and economic benefit.
The proper facilitation of exchanges by these third-party providers ensures that participants in an LKE program are not in actual or constructive receipt