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.

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