The Waterbury Democrat. [volume] (Waterbury, Conn.) 1917-1946, 1944-01-15
YOUR FEDERAL
INCOME TAX
No. II
INCOME CoNSTRUCTIVELY
RECEIVED

NGNEA Ell
In making a final return Of in
come for Federal income and victory
tax purposes, all income must be
reported except those items which
are specifically exempt, list Of
which may be found in the instruc-
tons attached to the return form
and in the next article In this series.
The report of income must include
income "constructively received" as
well as income actually received,
that is, income which becomes the
property Of a person during the year
though he does not have physical
possession of it.
Income Is constructively received
when it is Internationally credited
to ones account or set apart subject
to his order at any time. Thus, wages
are considered as constructively re-
ceived when they are credited to the
account of or set apart for an en-
ploye without any substantial limit
alton or restriction as to the time or
manner of payment or condition up
on which payment Is to be made.
and such wages are made available
to the employe so that they may be
drawn upon by him at any time.
Where wages are thus made avail
able to an employe but at his request
are paid to a third person, whether
in payment Of personal obligation
or under a VOW Of poverty, they are
includible In his gross income Just
as though they had actually passed
through his hands.
Similarly, interest credited on q
savings bank deposit Is income to the
depositor when credited, even though
1t may be drawn down or even en-
tered on his pass book. Income re-
ceived for a taxpayer by his agent.
such as rental payment. has been
constructively received when 1t Is
received by the agent.
Interest coupons which have ma
tured, and are payable, represent in
come constructively received by their
owner, even though they are not
cashed, unless, of course, there are
no funds available to pay the In
terest on the coupons. In the same
way, dividend checks ordinarily be-
come income when received, whether
they are caShed or not However, In
the case Of certain building and loan
associations, dividends declared and
credited may not be withrawn by
the shareholder until the maturity Of
the share in a future year. In such
cases, the dividends do not become
income during the year Of the credit,
but they become income In the year
Of the maturity Of the share.
Another instance Of constructive
receipt Of income may occur when
ones debts or bills are paid by an
other or where a debt Is forgiven. II
this payment Of q debt by another
or forgiveness Of a debt by Q credi.
tor, Is not by way Of outright gift
but in accordance with some agree.
ment, or business transaction, theT
the amount of the debt paid on be.
half OF the taxpayer or forgiven Il
him, becomes income to him in tn.
year in which such payment or for
giveneSs occurs.
It often happens that Taxpayer
who owns property agrees that thu
income from such property shall b
paid to a third party, or he may
contract to perform services TO Q
second party and 1t Is agreed that
the compensation shall be paid h
O third party. In each case the
amount paid to the third party al
the taxpayers order Is income con-
structively received" by the taxpay-
er, and 1t must be reported as In
come In his income tax return.