Constructive Receipt

AAA

DEFINITION of 'Constructive Receipt'

A tax term mandating that a taxpayer is liable for income, which has not been physically received, but has been credited to the taxpayer's account or otherwise becomes available for him or her to draw upon in the future. Constructive receipt of income prevents taxpayers from deferring tax on income or compensation they have not yet utilized or spent.

INVESTOPEDIA EXPLAINS 'Constructive Receipt'

The doctrine of constructive receipt applies to employees that use the cash-basis method of accounting. This means that an employee who received a paycheck at the end of one year must report it as income that year, even if he or she didn't deposit the check until after the new year. This doctrine also stipulates that receipt of funds by an agent is considered to be received by the principal at that time as well.

RELATED TERMS
  1. 1040 Form

    The standard Internal Revenue Service (IRS) form that individuals ...
  2. Earned Income

    Income derived from active participation in a trade or business, ...
  3. Active Income

    Income for which services have been performed. This includes ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  6. Taxable Income

    The amount of income that is used to calculate an individual's ...
Related Articles
  1. 10 Money-Saving Year-End Tax Tips
    Taxes

    10 Money-Saving Year-End Tax Tips

  2. Give Your Taxes Some Credit
    Taxes

    Give Your Taxes Some Credit

  3. Should I put money into a retirement ...
    Retirement

    Should I put money into a retirement ...

  4. How does the marginal tax rate system ...
    Investing

    How does the marginal tax rate system ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center