The Closing of the Sale: Payment of the proceeds by the buyer for the sale must be made strictly in accordance with the QI's closing instructions or constructive receipt
Avoiding constructive receipt
of unpaid rent from a corporation: D and J are the sole shareholders and directors of P, a cash-method C corporation.
Under the constructive receipt
doctrine, receipt by an agent is considered receipt by the principal, here the beneficiary (see Kamm's Estate, 349 F.2d 953 (3d Cir.
The opportunity to elect to forego these benefits will also not result in the constructive receipt
of income or wages for employees.
Such plans can lead to the issue of "constructive receipt
," subjecting the employer and employees to paperwork hassles and additional income tax obligations.
Importantly, the Tax Court rejected Webber's contention that he could not be taxed on the income realized by the assets within the segregated account because he was not in constructive receipt
of the income.
Tax deferment is not achieved if, prior to the actual receipt of payments, the employee is in constructive receipt
of the income under the agreement.
What is the doctrine of constructive receipt
? PLR 201232024
Under 2-705 there are several ways that the goods are received, including actual physical receipt and constructive receipt
(receipt by a third-party bailee).
In the American Jobs Creation Act of 2004, Congress imposed additional requirements to avoid constructive receipt
. Under IRC Section 409A, a participant may only receive a distribution of previously deferred compensation upon the occurrence of one of six events:
This deferral of compensation is not currently taxable to the employee, provided it is subject to a substantial risk of forfeiture (see the discussion of Section 409A on page 535 and Constructive Receipt
on page 386).
This arrangement will be treated as a like-kind exchange if the intermediary is a "qualified intermediary (55) and the taxpayer is not in constructive receipt
of the proceeds on the sale of the relinquished property.