Listen to a Business English Dialogue About Constructive receipt
Kennedy: Hi Isabelle, have you ever heard of the term “constructive receipt” in finance?
Isabelle: No, I haven’t. What does it mean?
Kennedy: Constructive receipt refers to the concept where income is considered to be received by a taxpayer even if they haven’t physically received it, but it’s made available to them.
Isabelle: So, if someone earns money but doesn’t physically get it, they still have to pay taxes on it?
Kennedy: Exactly. It’s commonly applied in situations like when a paycheck is issued but not cashed, or when funds are deposited into an account that the taxpayer can access.
Isabelle: That sounds a bit complicated. How does the IRS determine if someone has constructively received income?
Kennedy: The IRS looks at whether the taxpayer has control over the funds or if they could have accessed them if they chose to.
Isabelle: So, even if someone doesn’t actually take the money, they’re still considered to have received it?
Kennedy: Yes, that’s correct. It’s based on the idea that the taxpayer has the ability to access the funds and could have taken possession of them if they wanted to.
Isabelle: Are there any exceptions to the constructive receipt rule?
Kennedy: There are some exceptions, such as when income is subject to substantial limitations or restrictions that prevent the taxpayer from accessing it.
Isabelle: That makes sense. It’s important to understand these rules to avoid any issues with taxes.
Kennedy: Absolutely. Being aware of constructive receipt can help taxpayers stay compliant with tax laws and regulations.
Isabelle: Thanks for explaining, Kennedy. It’s a new concept for me, but I understand it better now.
Kennedy: You’re welcome, Isabelle. If you ever have more questions about tax concepts, feel free to ask!