Mario is an employee of Flores Company. The company regularly pays its employees by direct deposit on or before the last day of each month. Mario's regular paycheck is deposited on December 31, 2018, but Mario was away on vacation and didn't return until January 15, 2019. The gross amount of the check is included in Mario's 2018 income. Which of the following concepts or doctrines best explains this treatment?

Question

Quizplus · Accepted Answer

The constructive receipt doctrine applies in this situation. This doctrine holds that income has been received by a taxpayer when it's credited to their account or made available to them, even if they haven't physically received it yet. Since the paycheck was deposited on December 31, 2018, it's considered constructively received in that tax year, even though Mario didn't physically receive it until January 15, 2019.

Mario Is an Employee of Flores Company