Emily is a cash basis taxpayer,and she was an especially productive salesperson last year.In December of last year her supervisor told Emily she had earned a $5,000 bonus.However,Emily received the bonus check after year end.Identify the principle that will determine when Emily is taxed on the bonus:

Question

Quizplus · Accepted Answer

According to the constructive receipt principle, income is taxable when it is available to the taxpayer, even if they choose not to receive it. In this case, although Emily did not physically receive the bonus until after year end, she was informed and had control over it in December. Therefore, she must report it as income for the year in which she had constructive receipt of it.

Emily Is a Cash Basis Taxpayer,and She Was an Especially