Sarah is a salesperson who represents several wholesale companies. On January 2, 2014, she receives by mail a commission check from Ace Distributors in the amount of $10,000 and dated December 30, 2013. Sarah is concerned about the year in which the $10,000 is taxable. Although the check is dated 2013, she contends that it would have been unreasonable for her to drive the 50 miles to the Ace offices on a holiday to collect the check. Further, Sarah maintains that even if she had made the trip to collect the check, by the time she returned home, her bank would have closed and she could not have received credit for the check until after the first of the year. Sarah would like you to determine whether she should include the $10,000 on her 2013 or 2014 tax return.
ISSUE: Which year should Sarah consider this check of $10,000 taxable for?
CONCLUSIONS: Sarah can report the check of $10,000 taxable in 2014. AUTHORITY AND REASONING:
According to Code Treas. Reg.1.451-2(a).Income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions. In other words, the more control a taxpayer has over the receipt of income, the more likely the taxpayer has constructively received the income.
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