In the current year, ZT Inc., an accrual basis taxpayer, declares a $75,000 year-end bonus to its president, Mr.Z.Upon Z's request, ZT agrees to defer payment of the bonus for 10 years, at which time Z is anticipating retirement.The deferred compensation arrangement is unfunded, so that Z becomes an unsecured creditor of T.Based on these facts, which of the following is accurate?

Question

Quizplus · Accepted Answer

Mr. Z is not in constructive receipt of the income because he cannot access the funds until the agreed-upon time in the future. The principle of constructive receipt implies that income is taxable when it is made available to a taxpayer without restrictions. In this case, the deferral agreement places a restriction on Mr. Z's access to the funds, so he does not have to include the $75,000 in his income until it is actually paid to him.

In the Current Year, ZT Inc