What is Constructive Receipt?

The doctrine of constructive receipt is an important principle of income tax law, which reflects the point that income can be realized even though no cash or other tangible property or services have actually been received. Simply stated, if a taxpayer has an unqualified right to receive property or money which would constitute income, then he is deemed to have received it, even though he may not have actually physically received it. The doctrine is embodied in Treasury Regulation §1.451-2(a), which states in pertinent part:


Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions. Thus, if a corporation credits its employees with bonus stock, but the stock is not available to such employees until some future date, the mere crediting on the books of the corporation does not constitute receipt.


This doctrine, among other things, prevents taxpayers from deferring income to subsequent tax periods by voluntarily not taking payments that are freely available to them.

Recent Posts

See All

Proceeds of Life Insurance - I.R.C. §2042

Internal Revenue Code section §2042 deals with the inclusion in the gross estate, of the proceeds of life insurance policies, payable by reason of the death of the insured. In general, the insurance

Transfers Taking Effect at Death - I.R.C. §2037

Internal Revenue Code (I.R.C.) Section 2037 requires the inclusion in the gross estate of property which had been transferred by gift during lifetime if -- (1) possession or enjoyment of the property

ADLER & ADLER,PLLC

Wills, Trusts & Estates 

30 years of

1180 6th Avenue

8th Floor

New York, New York 10036

Call For Consultation:

212-843-4059 or 646-946-8327

EXPERIENCE

WE SERVE CLIENTS THROUGHOUT

NEW YORK STATE

Adler & Adler celebrating 30 years of succesful law practice
Top attorney Robert Adler gets highest rating from Avvo.

Serving New York State: New York City including Manhattan (New York County); Brooklyn (Kings County); Bronx; Queens; Staten Island (Richmond County); Long Island (Nassau County and Suffolk County); Westchester County, Rockland County, Erie County, Schenectady County,

Monroe County, Onandaga County, Orange County, Albany County, Dutchess County, Broome County, Sullivan County, and Ulster County.

​​​​ © 2019 Adler & Adler, PLLC - Attorney Advertising.  The content on this site does not constitute legal advice. There is no attorney-client relationship created through the presentation of this website or your sending us any information about your activities or needs. The commencement of an attorney-client relationship requires  our mutual written agreement on terms of engagement.