26 C.F.R. § 1.451-2

Constructive receipt of income

Read at: eCFRecfr.gov CornellLII GovInfogovinfo.gov CasesGoogle Scholar

(a) General rule. Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions. Thus, if a corporation credits its employees with bonus stock, but the stock is not available to such employees until some future date, the mere crediting on the books of the corporation does not constitute receipt. In the case of interest, dividends, or other earnings (whether or not credited) payable in respect of any deposit or account in a bank, building and loan association, savings and loan association, or similar institution, the following are not substantial limitations or restrictions on the taxpayer's control over the receipt of such earnings:

(1) A requirement that the deposit or account, and the earnings thereon, must be withdrawn in multiples of even amounts;

(2) The fact that the taxpayer would, by withdrawing the earnings during the taxable year, receive earnings that are not substantially less in comparison with the earnings for the corresponding period to which the taxpayer would be entitled had he left the account on deposit until a later date (for example, if an amount equal to three months' interest must be forfeited upon withdrawal or redemption before maturity of a one year or less certificate of deposit, time deposit, bonus plan, or other deposit arrangement then the earnings payable on premature withdrawal or redemption would be substantially less when compared with the earnings available at maturity);

(3) A requirement that the earnings may be withdrawn only upon a withdrawal of all or part of the deposit or account. However, the mere fact that such institutions may pay earnings on withdrawals, total or partial, made during the last three business days of any calendar month ending a regular quarterly or semiannual earnings period at the applicable rate calculated to the end of such calendar month shall not constitute constructive receipt of income by any depositor or account holder in any such institution who has not made a withdrawal during such period;

(4) A requirement that a notice of intention to withdraw must be given in advance of the withdrawal. In any case when the rate of earnings payable in respect of such a deposit or account depends on the amount of notice of intention to withdraw that is given, earnings at the maximum rate are constructively received during the taxable year regardless of how long the deposit or account was held during the year or whether, in fact, any notice of intention to withdraw is given during the year. However, if in the taxable year of withdrawal the depositor or account holder receives a lower rate of earnings because he failed to give the required notice of intention to withdraw, he shall be allowed an ordinary loss in such taxable year in an amount equal to the difference between the amount of earnings previously included in gross income and the amount of earnings actually received. See section 165 and the regulations thereunder.

(b) Examples of constructive receipt. Amounts payable with respect to interest coupons which have matured and are payable but which have not been cashed are constructively received in the taxable year during which the coupons mature, unless it can be shown that there are no funds available for payment of the interest during such year. Dividends on corporate stock are constructively received when unqualifiedly made subject to the demand of the shareholder. However, if a dividend is declared payable on December 31 and the corporation followed its usual practice of paying the dividends by checks mailed so that the shareholders would not receive them until January of the following year, such dividends are not considered to have been constructively received in December. Generally, the amount of dividends or interest credited on savings bank deposits or to shareholders of organizations such as building and loan associations or cooperative banks is income to the depositors or shareholders for the taxable year when credited. However, if any portion of such dividends or interest is not subject to withdrawal at the time credited, such portion is not constructively received and does not constitute income to the depositor or shareholder until the taxable year in which the portion first may be withdrawn. Accordingly, if, under a bonus or forfeiture plan, a portion of the dividends or interest is accumulated and may not be withdrawn until the maturity of the plan, the crediting of such portion to the account of the shareholder or depositor does not constitute constructive receipt. In this case, such credited portion is income to the depositor or shareholder in the year in which the plan matures. However, in the case of certain deposits made after December 31, 1970, in banks, domestic building and loan associations, and similar financial institutions, the ratable inclusion rules of section 1232(a)(3) apply. See § 1.1232-3A. Accrued interest on unwithdrawn insurance policy dividends is gross income to the taxpayer for the first taxable year during which such interest may be withdrawn by him.

[T.D. 6723, 29 FR 5342, Apr. 21, 1964, as amended by T.D. 7154, 36 FR 24997, Dec. 28, 1971; T.D. 7663, 44 FR 76782, Dec. 28, 1979]

Notes of Decisions

Cited in 192 cases (2 in the last 5 years), 1959–2025 · leading case: Am. Air Filter Co. v. Comm'r, 81 T.C. 709 (Tax Ct. 1983).

Sort: Relevance Newest Treatment

Am. Air Filter Co. v. Comm'r, 81 T.C. 709 (Tax Ct. 1983). · cites it 6× “The petitioner asserts that the dividend was "made" when it was declared on March 17, 1975, because the petitioner constructively received it at such time. Sec. 1.451-2(b), Income Tax Regs.”

Martin v. Comm'r, 96 T.C. 814 (Tax Ct. 1991). · cites it 8× “The concept of constructive receipt has been addressed in court opinions for more than 50 years.”

Browning v. Comm'r, 2011 T.C. Memo. 261 (Tax Ct. 2011). · cites it 4× “451-2(a), Income Tax Regs. , provides in pertinent part: Income although not actually reduced to a taxpayer's possession is constructively received *289 by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that…”

Schniers v. Comm'r, 69 T.C. 511 (Tax Ct. 1977). · cites it 4× “, explains the constructive receipt concept as follows: Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may…”

Miele v. Comm'r, 72 T.C. 284 (Tax Ct. 1979). · cites it 4× “Thus, we must decide whether the funds held in the trustee account are subject to substantial limitations or restrictions which bar the application of constructive receipt doctrine.”

Foil v. Comm'r, 92 T.C. 376 (Tax Ct. 1989). · cites it 2× “However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions.”

United States v. Kottwitz, 614 F.3d 1241 (11th Cir. 2010). · cites it 2× “26 C.F.R. § 1.451-2 (a). Constructive receipt does not occur, however, "if the taxpayer's control of [the received income] is subject to substantial limitations or restrictions.”

White v. Comm'r, 61 T.C. 763 (Tax Ct. 1974). · cites it 8× “Although the doctrine of constructive receipt is not defined by any Code section, it is explained in section 1.”

Furstenberg v. Comm'r, 83 T.C. 755 (Tax Ct. 1984). · cites it 4× “The general rule with respect to the inclusion of income under the doctrine of constructive receipt is set forth in section 1.451-2(a), Income Tax Regs. , as follows: Sec.”

Gale v. Comm'r, 2002 T.C. Memo. 54 (Tax Ct. 2002). · cites it 6× “Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available *83 so that he may draw upon it at any time, or so that he could have…”

United States v. Thompson, 518 F.3d 832 (10th Cir. 2008). “1998) (explaining, under the theory of constructive receipt, that a lost check was still taxable in the year it was received, even though the defendants did not obtain or cash a replacement check until two years later); see also 26 C.F.R. 1.451-2. For the doctrine of…”

United States v. Randolph George, 420 F.3d 991 (9th Cir. 2005). “Likewise, we do not consider 26 C.F.R. § 1.451-2 applicable as this regulation is specific to the allocation of constructively-received income.”

Show all 192 citing cases →

— 26 C.F.R. § 1.451-2(a) — 1 case

Graffia v. Comm'r, 2013 T.C. Memo. 211 (Tax Ct. 2013).

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.