A/R converted to a Note - Constructive receipt?

[LCP]

Does a cash basis taxpayer recognize income when A/R is converted to a Note Receivable?

Might it depend on the terms of the note? I wouldn't think so if the note is no more collectible than the trade A/R was. But what if it is secured?

[Edsel]

Makes No Difference

Cash has not been collected, so no income. If non-cash settlements are received in lieu of cash, the complexion changes.

[BOB W]

Agree>>> All that was done was make the A/R more secure, as to collection. They admit that the A/R is owed. Upon receipt you will have to account for interest as well.

[ChEAr$]

However

Agree>>> All that was done was make the A/R more secure, as to collection. They admit that the A/R is owed. Upon receipt you will have to account for interest as well.

I think this particular note receivable needs to be segregated somehow on the balance sheet to distinguish it from regular or normal notes receivable. I say that because clients change accountants, and if this happens in the future, the "new" accountant may not know what's up, much less ask questions to find out. Thus when actually collected, it might not be remembered as taxable income.