In 2017, Juan, a cash basis taxpayer, was offered $3 million for signing a professional baseball contract. He counter offered that he would receive $900,000 per year for 4 years beginning in 2018. The team accepted the counteroffer. Juan constructively received $3 million in 2017.

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Quizplus · Accepted Answer

Since Juan is a cash basis taxpayer, he would only recognize income when he actually receives the payment. Therefore, he would not have constructively received the $3 million in 2017, but rather when he receives the $900,000 payments in 2018 and the following years.

In 2017, Juan, a Cash Basis Taxpayer, Was Offered $3