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Constructive Receipt

Read Hornung v. Commissioner, 47 T.C. 428 (1967), which involves the constructive receipt doctrine and how it was used to determine the year of inclusion in taxable income. Review IRC Section 451, Treasury Reg. 1.451-1 (re: taxable year of inclusion), and Treasury. Reg. 1.451-2 (re: constructive receipt of income) which explain the constructive receipt doctrine which was at issue in the Hornung case. The Tax Court’s opinion does not explain why Hornung was arguing constructive receipt of the Corvette in 1961 (usually the IRS makes the constructive receipt argument). However, 1961 was clearly not at issue before the Tax Court and was most likely barred by the Section 6501(a) three-year statute of limitations which had run against the IRS. The Court’s opinion was issued in January 1967. A 1961 income tax return would be due on April 15, 1962. Under the normal three-year statute of limitations the IRS would have had until April 15, 1965 to assess additional tax for the 1961 tax year. Questions: 1) If the Tax Court held Hornung had constructively received the Corvette in 1961, what would the tax consequences be to Hornung in 1961 and 1962? Would he be required to pay income tax on the Corvette if the 1961 tax year was beyond the statute of limitations? 2) Are there exceptions to the general three-year statute of limitations found in Section 6501 that would have allowed the IRS to open the 1961 tax year? 3) what is the tax issue(s); 4) how did the Court ruled or decided the case 5) what is the legal reasoning and tax law the Court relied upon in reaching its decision. 

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