Constructive receipt

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In United States Income Tax theory, the doctrine of Constructive receipt requires that a cash method of accounting taxpayer to include into current period gross income deferred salary, bonuses, commissions, prizes and other accessions to wealth even though the taxpayer has yet to reduce them to income because the taxpayer had "unfettered control" or dominion over the funds. The leading case is of a bondholder who, because of being ill, failed to clip her coupons and cash them during the year and collected he cash in the next year. Held: coupon income includible in the tax year when the coupons came due. Loose v. United States, 64 F2d. 147 (8th Cir. 1934).

However, if a footballer wins a prize automobile on December 31, 1961, he has not constructively received the income in 1961 because he was not presented with the car until January 3rd, 1962 by the auto dealer sponsoring the promotion. Paul Hornung v. Commissioner of Internal Revenue, 47 T.C. 428 (1967).

“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.” IRS Regulation 1.451-2(a)