10th Brigade Engineer Battalion (10BEB) Board Practice Exam

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A cash-method taxpayer receives a customer check on December 31 and could cash it that day, but waits until January 4 to deposit it. When is the payment generally included in gross income?

In the year the check was made available on December 31 In the year the check was deposited When the bank clears the check Only when the taxpayer spends the funds

Correct Answer:

In the year the check was made available on December 31

Explanation:

Under the constructive receipt doctrine, cash-method taxpayers generally recognize income when it is credited to them, set apart for them, or otherwise made available without substantial restriction. The check was available on December 31, so it is income for that year.

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