Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Home
  • Accounting, Taxation, and Reporting
  • Business Taxation

Constructive Receipt - Explained

What is Constructive Receipt?

Written by Jason Gordon

Updated at April 8th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is Constructive Receipt?How Does Constructive Receipt Work?Academic Research on Constructive Receipt

What is Constructive Receipt?

Constructive receipt is a doctrine used by the Internal Revenue Service (IRS) that requires individuals and businesses to pay income taxes on their earnings even if the earnings have not been received. When the IRS applies the constructive receipt, whether an individual or business possesses the income does not matter, rather, what is put into consideration is that the individual has control over the income and how they are utilized. Hence, when an individual or business is in the constructive receipt, they have to pay taxes on income that are under their control, even if they are yet to be received.

Back to: Accounting & Taxation

How Does Constructive Receipt Work?

The constructive receipt is a doctrine that determines when an individual or company should account for income for tax purposes, this period is often towards the end of the year. This doctrine imposes income taxes on individuals and businesses, regardless of whether they are in possession of the income or not. Constructive receipt is not applicable to businesses that use the accrual accounting method. The IRS considers constructive receipt in this light: 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.


constructive receipt

Was this article helpful?

Yes
No

Related Articles

  • IRC 83a (Stock for Services) - Explained
  • Carryover Basis - Explained
  • Regulation M - Explained
  • Form 1099 - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand