Acct 305 - Tax Research Assignment

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Adrian also contends that even if she had collected the check in 2015, the money will still be credited on her account in 2016 because the time when she could arrive at the bank was after the bank’s business hours. Nevertheless, U.S. Tax court ruled in Kahler v. Commissioner,18 T.C.31 (1952) that the check was not subject to any restrictions which may have justified not considering as income until the following year. In the Court’s view, it was immaterial that Petitioner was not able to cash the check because the bank was closed. [3] Therefore, neither the check nor the bank’s business hours can be subject to substantial limitations or restrictions that prevent Adrian to consider this income as constructively received.

In addition, U.S. Court of Appeals for the Fifth Circuit rule in 1952 that the check, which could have been received the year before it was actually delivered to the recipient, should be considered as constructively received in the year prior to actual delivery. [4]

In conclusion, neither her claim that it was unreasonable to collect the check in 2015, nor the bank’s business hours, nor the fact that the check was actually delivered to Adrian can overturn the applicability of the doctrine of “Constructive Receipt of Income” in this case. Since the income was earned in 2015 and the check was available to be collected by Adrian in 2015, she should include the $10000 on her 2015 tax return.

Works Cited

[1] U.S. Code – Title 26 – Sec.451 (a)

[2] Code of Federal Regulations – Title 26 – Sec.1.451-2 (a)

[3] U.S. Tax Court Case – Kahler v. Commissioner, 18. T.C. 31, 34-35 (1952).

[4] U.S. Court of Appeals for the Fifth Circuit – 196 F.2d 127 (5th Cir. 1952)