Your client, Jack, has asked about the differences between the constructive receipt doctrine and the claim of right doctrine.Explain what each doctrine is by providing an example to help Jack understand the differences.
For federal income tax purposes, the doctrine of constructive receipt is used to determine when a cash-basis taxpayer has received gross income. A taxpayer is subject to tax in the current year if he or she has unfettered control in determining when items of income will or should be paid. In the tax law of the United States the claim of right doctrine causes a taxpayer to recognize income if they receive the income even though they do not have a fixed right to the income. This law is largely created by the courts, but some aspects have been codified into the Internal Revenue Code.