When does taxpayer have income


Question: Taxpayer owns 100% of the stock of Mega Corp and also serves as its CEO. In October of 20X2, the board of directors of Mega authorize a substantial dividend because of Mega's exceptional profitability in 20x2. In 20X2, Mega puts the money for the dividend into a bank account upon which Taxpayer is authorized to write checks. Following Mega's usual procedure of paying dividends at the end of the following year, on December 31, 20X3, Taxpayer writes a check to herself in payment of the dividend and puts the check in the mail to herself. Taxpayer receives the check at her home in 20X4, but does not deposit it into her bank account until 20x5. When does Taxpayer have income? a. 20X2, when Mega authorized the dividend. b. 20x3, when Taxpayer actually wrote the check to herself. c. 20x4, when Taxpayer receives the check at her home. d. 20X5, when Taxpayer deposits check into her bank account.

 

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Taxation: When does taxpayer have income
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