
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 29, 1993                   TAG: 9303260562
SECTION: MONEY                    PAGE: A6   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

QUIRK IN THE CALENDAR CAUSES CONFUSION ON REPORTING INCOME

The Roanoke chapter of the Virginia Society of Certified Public Accountants will answer tax-related questions from our readers in a special feature on the Monday Money Page. Send them in writing to Tax Questions, in care of Mag Poff, Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010.

Q: Because of a calendar quirk (Jan. 1, 1993, started a long weekend), the January Social Security payments were disbursed in December. Thus my January payment was credited to my bank account Dec. 31, 1992, and my monthly bank statement confirms this.

Although the IRS has ruled that it considers this payment to be 1993 income, does not the rule of "constructive receipt" allow me to report the Dec. 31 payment as 1992 income?

In support of this position, The Wall Street Journal reported on Feb. 24, 1993, that the federal government ran a budget surplus in January, much of it due to this calendar quirk.

A: It appears that the government will consider this a 1993 payment and will report it to you accordingly. However, if you have proof (your bank statement) that the payment actually was received in 1992, you can report the payment in 1992.

Individual taxpayers are considered to be on the cash basis of accounting unless they elect to use the accrual method of accounting.

Section 451 of the Internal Revenue Code states that income received by the taxpayer is taxed when it is available to the taxpayer without restriction. This is the "con- structive receipt" rule you refer to. A common example is interest credited on savings accounts or dividends declared payable in December, but not received by the taxpayer until January.

Because the Social Security Administration will issue a 1993 Form 1099 that will include the January 1993 payment received in December 1992, the taxpayer should attach a memo to the tax return that reconciles the amount reported on the 1099 to the amount reported on the tax return. You should include a memo in both your 1992 and 1993 income tax returns.

Answered by Melinda T. Chitwood of Brown, Edwards & Co.

by CNB