Alexis, a cash basis contractor, builds a storage building for Jones. The building is completed, and the bill is given to Jones. Jones pays $60,000 in 2014. Subsequently, Jones files suit for damages based on alleged faulty construction. Alexis required to recognize $60,000 of income in 2014 based upon I. Constructive Receipt Doctrine. II. Claim-of-right Doctrine.

Question

Quizplus · Accepted Answer

The claim-of-right doctrine requires income to be recognized when received, even if there is a dispute over the right to keep it. The constructive receipt doctrine does not apply here as Alexis is a cash basis taxpayer and recognizes income when actually received.

Alexis, a Cash Basis Contractor, Builds a Storage Building for Jones