The Claim-of-Right Doctrine
I.explains why Carla does not report $10,000 of income on her tax return when she borrows $10,000 from the First Savings Bank.
II.differs from the constructive receipt doctrine in that constructive receipt applies where an amount has been received,and the tax question is whether the amount is taxable in the current year.
III.explains why Samuel reports $45 of interest credited to his savings account on December 31,2016,on his 2015 tax return,even though he does not actually receive the cash in 2016.
IV.applies when a taxpayer has no definitive obligation to repay the amount received.

Question

The Claim-of-Right Doctrine
I.explains why Carla does not report $10,000 of income on her tax return when she borrows $10,000 from the First Savings Bank.
II.differs from the constructive receipt doctrine in that constructive receipt applies where an amount has been received,and the tax question is whether the amount is taxable in the current year.
III.explains why Samuel reports $45 of interest credited to his savings account on December 31,2016,on his 2015 tax return,even though he does not actually receive the cash in 2016.
IV.applies when a taxpayer has no definitive obligation to repay the amount received.
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Quizplus · Accepted Answer

The Claim-of-Right doctrine applies when a taxpayer receives income and believes they have a legal right to the income, even if they later have to return it. This explains why Carla does not report $10,000 of income on her tax return when she borrows $10,000 from the First Savings Bank. The Claim-of-Right doctrine also applies when a taxpayer has no definitive obligation to repay the amount received. On the other hand, the constructive receipt doctrine applies where an amount has been received, and the tax question is whether the amount is taxable in the current year. This explains why Samuel reports $45 of interest credited to his savings account on December 31, 2016, on his 2015 tax return, even though he does not actually receive the cash in 2016. Therefore, Statements I and IV are correct.

The Claim-Of-Right Doctrine I.explains Why Carla Does Not Report $10,000 of Income on of Income