Tax Update Blog: Permalink
« Previous · Tax Update Blog Home · Next »
CONSTRUCTIVE RECEIPT: YOU DON'T TOUCH IT, IT'S YOURS
July 06, 2006
Keith Scherbart sold corn through the Mennesota Corn Processors cooperative in the 1990s. The co-op made annual "value added" payments to its members based on its margins on corn deliveries.
In August 1994 and August 1995 the co-op sent a letter to its members saying the value-added payment for the year would be ready by November. The letter gave members the option to the member to defer the payment until the following year. Mr. Scherbart took them up on the offer and deferred the payments. When he filed his 1040s, he also deferred the taxes.
The IRS didn't go along with this, saying the members had "constructively received" the deferred amounts. Mr. Scherbart lost in the Tax Court. He appealed, and yestereday the Eighth Circuit Court of Appeals upheld the Tax Court. The appeals panel said that the value-added payments weren't sales proceeds to the members, but instead distributions of net proceeds by MCP acting as Mr. Scherbart's agents.
The Moral: If your agent has the cash, you have to pay the tax.
Links:
Bookmark: del.icio.us • Digg • reddit
Tax Updates
Subscribe to Tax Updates
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not neccesarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
Search Tax Updates
Friends and Neighbors
Economics Nerds
Hard-Core Tax Nerds
Gigablogs
Insurance Folk
Goners
Legislation
Tax Update Data Feeds
