Post-dated check, mobile deposit & constructive receipt

The bank credited to you in 2017, and you couldn't have had it credited earlier. Constructive receipt would be 1/3/17 (or possibly 1/2/17, if it were a banking day, even though a Federal holiday.)

-- Arthur L. Rubin, AFSP, CRTP, Brea, CA

If you received and deposited the check in 2016, AND the bank clears the item in the ordinary course of business (ie: it doesn't hiccup because the check was postdated), then I'd guess you have receipt in 2016.

MTW

On 01/04/2017 10:32 AM, Arthur Rubin wrote: > The bank credited to you in 2017, and you couldn't have had it > credited earlier. Constructive receipt would be 1/3/17 (or possibly > 1/2/17, if it were a banking day, even though a Federal holiday.)

On 01/04/2017 11:17 AM, MTW wrote: > If you received and deposited the check in 2016, AND the bank clears > the item in the ordinary course of business (ie: it doesn't hiccup > because the check was postdated), then I'd guess you have receipt in > 2016.

Anyone want to break the tie? ;-)

Actually, I've become reasonably certain that it is 2016 income.

First, I don't think that the date on the check is relevant to this issue. Apparently it isn't that uncommon for banks to accept post-dated checks "early".

This is confirmed by my wife, who works as a branch banker/teller at a major U.S. retail bank.

So the remaining issue is the fact that December 31 was a holiday. Assuming that the comment about Kahler v Commissioner in this post are correct, that seems pretty definitive.

I have not been able to deposit a rent check dated the first when the tenant handed it to me on the 31st, even AFTER I pointed out the relevant law to my financial institution. So, I push you back into the tie.

I would break the tie this way: which does taxpayer prefer?

Yes, I certainly agree with that. The date written on the check has no legal effect from the standpoint of when the payment is received.

Not all banks will do that. But with ATM machinese these days, deposits can be made at any time of the day or night, and the date on the check is not examined by the ATM machine - at least not in my experience.

In the old days before ATMs became so ubiquitous the rule was that if you received the check after you could practically have cashed it at the end of the year, it would not be recognized until the following year. I would imagine the same rule would apply now, since ATM deposits are conditional until the following business day, and ATM withdrawals after business hours may actually be considered loans until the next business day.

Some banks will go one way, some with go the other. But what the bank actually does based on the date written on the check is idiosyncratic, and not likely to influence the say the IRS would see the deposit.

I agree with that. It seems to me that this is a close enough call that the taxpayer could legitimately claim it in either year, unless it might make a huge difference in his tax. The IRS would generally always opt for earlier inclusion so that they can get tax on the transaction sooner.

If Kahler is still good law, it seems pretty clear that it's 2016 income; the decision seems to indicate that you have (then 1952) income if you could have sold (not cashed) the check before the end of the year. I haven't Shepardized Kahler lately (meaning, I'm not going to pay my service to check it for someone other than an actual client), so I'll withdraw might comment.

-- Arthur Rubin, AFSP, CRTP, Brea, CA

Funny that.

Our largest rental property was vacant for several months this year, so we're going to have a disallowed passive activity loss either way.

If we recognize the income in 2016, the disallowed loss that gets carried forward to 2017 will be smaller, but 2017 income will be smaller by an equal amount.

So the taxpayer doesn't really have any preference.