TAXATION - FEDERAL INCOME TAX - DEFERRED COMPENSATION AS AFFECTED BY CONSTRUCTIVE RECEIPT DOCTRINE

Authors

David D. Dowd, Jr. S.Ed., University of Michigan Law SchoolFollow

Abstract

Prior to his retirement as a general agent of a life insurance company, the petitioner entered into a new contract with the company by which he was to receive upon retirement fixed monthly instalments for fifteen years in lieu of his original contract rights to receive renewal premium commissions as they were paid into the company. Petitioner, as a cash basis taxpayer, reported as income only the instalments received. The Commissioner assessed deficiencies in the reports, contending that petitioner's taxable income consisted of all renewal commissions received by the company during the taxable year, rather than the instalment payments. Rejecting the Commissioner's argument that the constructive receipt doctrine was applicable to the renewal commissions, the Tax Court upheld the petitioner's challenge of the assessment of the deficiencies. On appeal, held, affirmed. Since the new contract calling for fixed monthly instalments was a binding substituted contract, the taxpayer had no contractual right to the additional renewal commissions. Therefore the constructive receipt doctrine was inapplicable and only the fixed monthly instalments were income to the taxpayer. Commissioner v. Oates, (7th Cir. 1953) 207 F. (2d) 711.

Recommended Citation

David D. Dowd, Jr. S.Ed., TAXATION - FEDERAL INCOME TAX - DEFERRED COMPENSATION AS AFFECTED BY CONSTRUCTIVE RECEIPT DOCTRINE, 52 Mich. L. Rev. 1252 (1954).
Available at: https://repository.law.umich.edu/mlr/vol52/iss8/19