ACC 442 Lecture Notes - Lecture 8: Constructive Receipt, Gross Income, Qualified Dividend
Cash Receipt Method
Cash, property, or services received are included in the taxpayer's gross income in the same year or
constructive receipt by the taxpayer
The rationale of Constructive Receipt
the taxpayer should not be allowed to postpone income recognition
Under the cash receipt method, a note received in payment for services will be recognized at...
Fair Market value of the note
The 2 Requirements of the Accrual Method
1. all events have occurred that grant the right to receive income
2. the amount to be received can be reasonably determined
Claim of right doctrine
A payment received before a settled dispute must be recognized in the gross income at receipt
When a taxpayer's right to income is contested
Gross income is only recognized when payment has been received (with the exception of claim of right
doctine)
2 Conditions of Construction Receipt
1. the amount is ready for taxpayer
2. the entitled receipt is not subject to restrictions
Constructive Receipt
The income has not actually been received but the it will be taxed as if it were
Assignment of income (connected with fruit and tree metaphor)
assigning income to another party to avoid tax liability
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Document Summary
Cash, property, or services received are included in the taxpayer"s gross income in the same year or constructive receipt by the taxpayer. The rationale of constructive receipt the taxpayer should not be allowed to postpone income recognition. Under the cash receipt method, a note received in payment for services will be recognized at The 2 requirements of the accrual method: all events have occurred that grant the right to receive income, the amount to be received can be reasonably determined. A payment received before a settled dispute must be recognized in the gross income at receipt. When a taxpayer"s right to income is contested. Gross income is only recognized when payment has been received (with the exception of claim of right doctine) 2 conditions of construction receipt: the amount is ready for taxpayer, the entitled receipt is not subject to restrictions. The income has not actually been received but the it will be taxed as if it were.