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 31,2013,on his 2013 tax return,even though he does not actually receive the cash in 2013.
IV.applies when a taxpayer has no definitive obligation to repay the amount received.

Question

Quizplus · Accepted Answer

Statement I is correct because the Claim-of-Right Doctrine allows a taxpayer to exclude income from their tax return if they believed the income was rightfully theirs, even though it may later be determined that they were not entitled to it.

Statement IV is also correct because, under the Claim-of-Right Doctrine, a taxpayer is not required to repay the amount received.

Statement II is incorrect because the constructive receipt doctrine applies when the amount has been received, not when it has only been borrowed.

Statement III is also incorrect because the Claim-of-Right Doctrine would not apply in Samuel's case as he has actually received interest credited to his account, even if he has not withdrawn the cash.

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