Constructive Receipt

[JG EA]

I have a question about constructive receipt. It is simple to understand that one person could count something sent out December 27th and another person could not count it because of receiving it January 3rd.

What about an installment sale? The interest is reported by the escrow company to my client on a 1099, the principal is on the printout for the year, but the actual check to my client goes to her bank account (via mail) and the bank has given her proof that they did not receive it in 2007.

Would there be any differernce with this situation?

[JohnH]

I'll also be interested in what others say, but it's always been my understanding that the mailing of the check constitutes construtive receipt. In theory, the client could have gone to the payer and picked up the check. By allowing the check to be mailed, the client has simply chosen a delivery method more favorable to them, but constructiev receipt still occurred. I don't necessarily like that argument, but it's what I hear.

Now if the client could prove via the postmark that the check was dated Dec 27 but actually MAILED by the payer after Dec 31, then they would have an argument.

[veritas]

The escrow company

"The interest is reported by the escrow company to my client on a 1099, the principal is on the printout for the year, but the actual check to my client goes to her bank account (via mail) and the bank has given her proof that they did not receive it in 2007."




is operating as the taxpayer's agent. Hence the client has constructive receipt.

[JG EA]

Thanks! Very clear when you know what your are talking about.

[Gretel]

Additional comment

In this case it makes sense that client has constructive receipt. But if it were another company sending you a check, isn't constructive receipt when it is in your mailbox?

[JohnH]

It's my understanding that receipt occurs when the check is placed in the mail by the sender, unless there is a written agreement stating that receipt occurs when delivered. But I could be wrong...

[Davc]

In this case it makes sense that client has constructive receipt. But if it were another company sending you a check, isn't constructive receipt when it is in your mailbox?

Facts and circumstances. If they're in the next town over and they normally mail your payment, it's when it hit's the box. If you normally pick up the check, it's when it's available to be picked up.