Define the term constructive receipt. Explain its importance. A. Under the conce

Question

Define the term constructive receipt. Explain its importance.

A. Under the concept of constructive receipt, income is taxed when it is received by the taxpayer. The taxpayer can transfer the income to another person to avoid paying taxes.

B. Under the concept of constructive receipt, income is taxed when it becomes available to the taxpayer. The taxpayer cannot defer the tax by refusing to accept payment.

C. Under the concept of constructive receipt, income is taxed once earned but not received by the cash-basis taxpayer. The taxpayer cannot defer the tax by refusing to accept payment.

D. Under the concept of constructive receipt, income is taxed once earned and received by the cash-basis taxpayer. The taxpayer can defer the tax by refusing to accept payment.

Explanation / Answer

The correct answer is option (A). Under the concept of constructive receipt, income is taxed when it is received by the taxpayer. The taxpayer can transfer the income to another person to avoid paying taxes.

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