Question

What is the purpose of the constructive receipt doctrine?

1) To require recognition of income when it is made available to the cash basis taxpayer
2) To require recognition of income when it is actually received by the cash basis taxpayer
3) To apply only to accrual basis taxpayers
4) To apply only to cash basis taxpayers

Answer 1

The constructive receipt doctrine mandates the recognition of income as soon as it is available to a taxpayer, which affects cash basis taxpayers when the income is under their control without restrictions.

Step-by-step explanation:

The purpose of the constructive receipt doctrine is to require recognition of income when it is made available to the taxpayer, without any restrictions on its use, even if the income has not been actually received in hand. This principle predominantly applies to taxpayers who use the cash basis method of accounting. Thus, the correct answer to the student's question is 1) To require recognition of income when it is made available to the cash basis taxpayer.