[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.451-2]

[Page 110-112]
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.451-2  Constructive receipt of income.

    (a) General rule. Income although not actually reduced to a 
taxpayer's possession is constructively received by him in the taxable 
year during which it is credited to his account, set apart for him, or 
otherwise made available so that he may draw upon it at any time, or so 
that he could have drawn upon it

[[Page 111]]

during the taxable year if notice of intention to withdraw had been 
given. However, income is not constructively received if the taxpayer's 
control of its receipt is subject to substantial limitations or 
restrictions. Thus, if a corporation credits its employees with bonus 
stock, but the stock is not available to such employees until some 
future date, the mere crediting on the books of the corporation does not 
constitute receipt. In the case of interest, dividends, or other 
earnings (whether or not credited) payable in respect of any deposit or 
account in a bank, building and loan association, savings and loan 
association, or similar institution, the following are not substantial 
limitations or restrictions on the taxpayer's control over the receipt 
of such earnings:
    (1) A requirement that the deposit or account, and the earnings 
thereon, must be withdrawn in multiples of even amounts;
    (2) The fact that the taxpayer would, by withdrawing the earnings 
during the taxable year, receive earnings that are not substantially 
less in comparison with the earnings for the corresponding period to 
which the taxpayer would be entitled had he left the account on deposit 
until a later date (for example, if an amount equal to three months' 
interest must be forfeited upon withdrawal or redemption before maturity 
of a one year or less certificate of deposit, time deposit, bonus plan, 
or other deposit arrangement then the earnings payable on premature 
withdrawal or redemption would be substantially less when compared with 
the earnings available at maturity);
    (3) A requirement that the earnings may be withdrawn only upon a 
withdrawal of all or part of the deposit or account. However, the mere 
fact that such institutions may pay earnings on withdrawals, total or 
partial, made during the last three business days of any calendar month 
ending a regular quarterly or semiannual earnings period at the 
applicable rate calculated to the end of such calendar month shall not 
constitute constructive receipt of income by any depositor or account 
holder in any such institution who has not made a withdrawal during such 
period;
    (4) A requirement that a notice of intention to withdraw must be 
given in advance of the withdrawal. In any case when the rate of 
earnings payable in respect of such a deposit or account depends on the 
amount of notice of intention to withdraw that is given, earnings at the 
maximum rate are constructively received during the taxable year 
regardless of how long the deposit or account was held during the year 
or whether, in fact, any notice of intention to withdraw is given during 
the year. However, if in the taxable year of withdrawal the depositor or 
account holder receives a lower rate of earnings because he failed to 
give the required notice of intention to withdraw, he shall be allowed 
an ordinary loss in such taxable year in an amount equal to the 
difference between the amount of earnings previously included in gross 
income and the amount of earnings actually received. See section 165 and 
the regulations thereunder.
    (b) Examples of constructive receipt. Amounts payable with respect 
to interest coupons which have matured and are payable but which have 
not been cashed are constructively received in the taxable year during 
which the coupons mature, unless it can be shown that there are no funds 
available for payment of the interest during such year. Dividends on 
corporate stock are constructively received when unqualifiedly made 
subject to the demand of the shareholder. However, if a dividend is 
declared payable on December 31 and the corporation followed its usual 
practice of paying the dividends by checks mailed so that the 
shareholders would not receive them until January of the following year, 
such dividends are not considered to have been constructively received 
in December. Generally, the amount of dividends or interest credited on 
savings bank deposits or to shareholders of organizations such as 
building and loan associations or cooperative banks is income to the 
depositors or shareholders for the taxable year when credited. However, 
if any portion of such dividends or interest is not subject to 
withdrawal at the

[[Page 112]]

time credited, such portion is not constructively received and does not 
constitute income to the depositor or shareholder until the taxable year 
in which the portion first may be withdrawn. Accordingly, if, under a 
bonus or forfeiture plan, a portion of the dividends or interest is 
accumulated and may not be withdrawn until the maturity of the plan, the 
crediting of such portion to the account of the shareholder or depositor 
does not constitute constructive receipt. In this case, such credited 
portion is income to the depositor or shareholder in the year in which 
the plan matures. However, in the case of certain deposits made after 
December 31, 1970, in banks, domestic building and loan associations, 
and similar financial institutions, the ratable inclusion rules of 
section 1232(a)(3) apply. See Sec. 1.1232-3A. Accrued interest on 
unwithdrawn insurance policy dividends is gross income to the taxpayer 
for the first taxable year during which such interest may be withdrawn 
by him.

[T.D. 6723, 29 FR 5342, Apr. 21, 1964; as amended by T.D. 7154, 36 FR 
24997, Dec. 28, 1971; T.D. 7663, 44 FR 76782, Dec. 28, 1979]