Freda is a cash basis taxpayer. In 2023, she negotiated her salary for 2024. Her employer offered to pay her $21,000 per month in 2024 for a total of $252,000. Freda countered that she would accept $10,000 each month for the 12 months in 2024 and the remaining $132,000 in January 2025. The employer accepted Freda's terms for 2024 and 2025.
Freda is a cash basis taxpayer. In 2023, she negotiated her salary for 2024. Her employer offered to pay her $21,000 per month in 2024 for a total of $252,000. Freda countered that she would accept $10,000 each month for the 12 months in 2024 and the remaining $132,000 in January 2025. The employer accepted Freda's terms for 2024 and 2025.
a. Did Freda actually or constructively receive $252,000 in 2024?
. The amount the employer might have been willing to pay
constructively received in 2024 because under the actual contract terms, she
have the right to receive the income in 2024.
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b. What could explain Freda's willingness to spread her salary over a longer period of time?
Freda may be bargaining for the deferred payments because she expects to be in
marginal tax bracket in 2025.
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