Define the term constructive receipt. Explain its importance.

(A) Under the concept of constructive receipt, income is taxed when it is received by the taxpayer. The taxpayer can transfer the income to another person to avoid paying taxes.

(B) Under the concept of constructive receipt, income is taxed when it becomes available to the taxpayer. The taxpayer cannot defer the tax by refusing to accept payment.

(C) Under the concept of constructive receipt, income is taxed once earned but not received by the cash-basis taxpayer. The taxpayer cannot defer the tax by refusing to accept payment.

(D) Under the concept of constructive receipt, income is taxed once earned and received by the cash-basis taxpayer. The taxpayer can defer the tax by refusing to accept payment.

PART A

A constructive receipt is a term often used in both accounting and taxation to describe the taxation of an income even when the income had not been received by the person being taxed.

IMPORTANCE OF CONSTRUCTIVE RECEIPTS

It guarantees the early payment of taxes without undue delays from the tax payer.

It ensures effective taxation by effective tracking of the tax payers.

PARTB

(B) Under the concept of constructive receipt, income is taxed when it becomes available to the tax payer. The taxpayer cannot defer the tax by refusing to accept payment.

Explanation:

Constructive reciept is of great importance and relevance in the field of cost accounting and taxation,it guarantees early payment of taxes and effective tracking of tax payers by the regulatory or taxation bodies.

Under the concept of constructive reciept, income is taxed when it becomes available to the tax payer and it can not be deferred by refusing to accept payment.

Option (C) is correct

Here in this given comprehension, Carol profess that entry of new organization in market will further lead to reduction in prices. However, new tax introduced by authorities will therefore increase costs for organization in industry. Therefore, we could state that even though there are new firms entering, this does not necessarily mean prices will fall.

i.e. To reduce emissions, the government has recently introduced tax per mile driven on automobiles, if true, would weaken Carol's argument that competition will drive prices down