Jason's employer pays year-end bonuses each year on December 31. Jason, a cash basis taxpayer, would prefer to not pay tax on his bonus this year (and actually would prefer his daughter to pay tax on the bonus). So, he leaves town on December 31, 2016 and has his daughter, Julie, pick up his check on January 2, 2017. Who reports the income and when?

Question

Quizplus · Accepted Answer

Jason, as a cash basis taxpayer, is considered to have constructively received the income when it was made available to him on December 31, 2016, regardless of whether he physically picked it up. Therefore, he must report the income in 2016.

Jason's Employer Pays Year-End Bonuses Each Year on December 31