Never cashed stock proceeds check

[Taxadvisor VA]

Client just received an IRS letter saying two stock sales (1099B issued) were never entered on 2011 tax return. When I spoke to client about this yesterday, the original check (never cashed) was in their possession. In fact, this morning a copy was sent to me.

From my seat, transaction was never finalized b/c check was not cashed. My position is to respond to this letter with a copy of the check requesting the 1099B be voided. You may be asking why not cash the check? Divorce proceeding!

What do you think?

Hope everybody had a successful tax season.

Best Regards,

Taxadvisor VA

[dkss]

My opinion, cash based taxpayer, income when RECEIVED, not when cashed. Transaction was finalized when company issued the check.

[David1980]

Constructive receipt. Taxpayer had access to the funds when they received the check.

[Jiggers]

I agree. Client had access to the funds. Taxable.

[Roberts]

If he had deposited the check into the bank account versus cashing it would you claim he didn't actually receive the cash so the transaction isn't completed?

Once he received the check in the mail, holding it doesn't eliminate the fact he has access to the money if he so chooses.

[Burke]

From my seat, transaction was never finalized b/c check was not cashed. My position is to respond to this letter with a copy of the check requesting the 1099B be voided. You may be asking why not cash the check? Divorce proceeding!
Taxadvisor VA

Even if you did this it would not matter. It is still going to be 1099'd to him in 2011 regardless, and I assume has to be dealt with on a joint return. Reissuing the check will not change that. PS: He is probably going to have to get a new check anyway; it is likely too old to cash now.