1) I received a paycheck on 1/4/2011, for pay period 12/1/2010 to
12/15/2010. Even though I received the pay in 2011, it's still taxed and reported on the 2010 W-2 right? The reason I ask is because the "YTD" numbers shown on the ADP stub show the payment as allocated in the 2011 YTD calculations.
2) I bought shares of a stock and paid $5 commission. I sold a portion of the stock and paid another $5 commission for the sale. For the calculating the cost basis, do I account for the $5 purchase commission as a percentage of shares that I sold? (e.g. I sold 50% of shares, so I apply $2.50 towards cost basis). Or, can I just apply the full $5 towards the cost basis of my partial sale, and then when I sell the rest of the shares, claim that the purchase commission was zero?
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D
D. Stussy
No. It is included in 2011 because that is the year of your payday. W-2's always report using cash-basis accounting.
No. However, you include a FRACTION of the $5 commission from the purchase - the same ratio of the amount sold to amount purchased.
A
Alan
I'm repeating myself here.....
This must be the time of year for constructive receipt questions. The situation you raise has been asked and answered and litigated numerous times. I have come to rely upon PPCs Guide to Employee Compensation that goes into constructive receipt of employee compensation. As it is copyrighted, I will apply it to your situation rather than copying.
You have 2010 income if your employer practice contains an option for you to have the check hand delivered to you or direct deposited for you. If the only option available from your employer is mailing of checks, then you have income when the payment arrives. You did not provide us the facts surrounding your receipt of a payroll check on 1/4 for a payroll period that ended on 12/15. That seems very late to me. However, there was a case where a payor was short on capital and intentionally delayed mailing of the checks. There was another case where a payor made the check available and asked the payee not to cash it until the next year. In both cases, there was no constructive receipt because there was substantial limitations on having the funds available.
There was one tax court case where a check sent by certified mail arrived on 12/31 and the t/p was not home. The postman left a note. The t/p did not pickup the check until the following year. The t/p declared the income in the following year. The court ruled in the t/p favor because the payor had told her that the check would not arrive until the following year. There was another situation where a certified check ( I believe it was employee compensation) arrived on 12/31 and the t/p was not at home. It was considered constructively received because the employee was aware that the check was to arrive by 12/31.
Professionals: See Information Letter 2006-005.
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