Constructive Receipt

Today TaxMama hears from Manola in the Tax Parlor, who says, “I sold a house, the closing was on 12/29/06. The proceeds were to be wired to my acct. on that date, but it posted 1/2/07. Do I pay my taxes on the monies (it is not a primary residence), on 1996, 1997, or whenever is less damaging?”

Dear Manola,

How very interesting. And, I’ll bet we have some people weigh in on this answer.

Typically, as a cash-basis taxpayer,yoiu don’t report income until you receive it. In your case, tha’s 2007.

However, this is a sale, where title passed on 12/29/06. So, legally, the sale was completed.

So, what are your options? Pick one:

1) report the whole sale in 2006.

2) Report the sale in 2006 – but as an installment sale (Form 6252), showing the down payment as the first installment, if you recieved one – and the rest of  the sale in 2007, showing the money revieved in that year. That will throw most of the profit into 2007.

3) Report the whole sale in 2007? Hmmm. I can see the argument. But I don’t think it would hold up.

Without doing reserach into case law, this is my educated opinion.

If option 2 doesn’t work for you, consider having someone do some research for you.

And remember, you’ll find answers to lots of questions about constructive receipt and other tax information, free. Where? At .

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