. Times New Ro , 12 \' A-Ar A. B Ibe X2 X A AParagraph Styles aeriniion or tne i
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Question
. Times New Ro , 12 ' A-Ar A. B Ibe X2 X A AParagraph Styles aeriniion or tne income ior tax purposes any gain obtained by the employee is secondary or incidental to the employer's business purpose that is served by granting such benefit. b. c. the value of the benefit obtained by the employee is not determinable. d. the benefit obtained by the employee is not in the form of cash. 2. In which of the following situations would the taxpayer not be considered in constructive eceipt of income in 2017? Assume that all of the taxpayers use the cash method of accounting. a Al is a self-employed accountant. On December 27, 2017, he received a check for $2,000 for preparing the November financial statements of one of his clients. Due to illness, he was unable to deposit the check until January 5, 2018 Ben entered into a contract to sell his rental property on December 3, 2017. On that date, the down payment, a check for $1,000, was placed in an escrow account. Ben received the check when the transaction closed on January 20, 2018. b. c. Sugar Ray fought Rocky on December 25, 2017, a Christmas fight shown on television all over the world. On December 28, the fight promoters gave Sugar Ray's agent, Don Queen, a check for $5 million representing his prize money for the fight. Don delivered the check to Sugar Ray on January 12, 2018. d. On December 20, 2017, Mr. Big received stock worth $10,000 as a bonus from the corporation for which he worked. He did not sell the stock until January 5 2018. e. All of the taxpayers above are in constructive receipt of the income items. Quiz Chapter 5 OWl nstr es not : 20 F3 F4 FS F6 F7 F8Explanation / Answer
Q.2. b. is correct
Explanation - With reference to "IRS Tax" The general rule is that an item included in gross income by cash- basis taxpayer when it is actually or constructively received. Income is constructively received in the taxable year during which it is credited to the taxpayer's account, set apart for him, or otherwise made available 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 its receipt is subject to substantial limitations or restrictions. The payment in escrow is subject to substantial limitations or restrictions on receipt and thus is not constructively received.
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