Question

Clyde is a cash-method taxpayer who reports on a calendar-year basis. This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,700. Determine the amount Clyde should include in his gross income this year under the following circumstances: (Leave no answer blank. Enter zero if applicable.)
a. Paylate Corporation wrote the check and put it in his office mail slot on December 30 of this year, but Clyde did not bother to stop by the office to pick it up until after year-end.
Amount to be included:_______
b. Paylate Corporation mistakenly wrote the check for $100. Clyde received the remaining $900 after year-end.
Amount to be included:______
c. Paylate Corporation mailed the check to Clyde before the end of the year, (and it was delivered before year end). Although Clyde expected the bonus payment, he decided not to collect his mail until after year-end.
Amount to be included:_______
d. Clyde picked up the check in December, but the check could not be cashed immediately because it was postdated January 10.
Amount to be included:_______

Answer 1

Answer:

a. $1,700 b. $100 c. $1,700 d. $0

Explanation:

I think the question should be this way

Clyde is a cash-method taxpayer who reports on a calendar-year basis. This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,700. Determine the amount Clyde should include in his gross income this year under the following circumstances: (Leave no answer blank. Enter zero if applicable.)

a. Paylate Corporation wrote the check and put it in his office mail slot on December 30 of this year, but Clyde did not bother to stop by the office to pick it up until after year-end.

Amount to be included:_______

b. Paylate Corporation mistakenly wrote the check for $100. Clyde received the remaining $1600 after year-end.

Amount to be included:______

c. Paylate Corporation mailed the check to Clyde before the end of the year, (and it was delivered before year end). Although Clyde expected the bonus payment, he decided not to collect his mail until after year-end.

Amount to be included:_______

d. Clyde picked up the check in December, but the check could not be cashed immediately because it was postdated January 10.

Amount to be included:_______

Explanation:

a. Clyde is taxed on the $1,700 under the constructive receipt doctrine.

b. Clyde is taxed on the $100 - the remaining $1600 is taxed in the next year.

c. Clyde is taxed on $1,700 unless the mail was not delivered until after year-end. Clyde would need to check his mail on December 31 or he would have the burden of proving he didn't receive the check before year-end if the IRS alleges that the check was delivered before year-end.

d. Clyde is not taxed until next year because the postdated check is a substantial restriction.