Vander Poel, Francis & Co. Inc., v. Commissioner 8 T.C. 407 (Tax Ct. 1947) VPF Inc. was a company whose two officers were a guy named Vander Poel and a guy named Francis (surprising huh?). In December 1942, VPF paid Vander Poel and Francis their salaries with checks. Vander Poel and Francis didn't cash those checks until January 1943, so the money was still in VPF's bank account at the end of the year. When they filed their 1942 taxes, VPF took a deduction for the salaries as a business expense. The IRS disagreed and assessed a deficiency. The IRS argued that the money was still in VPF's bank account, so they didn't technically pay the salaries until January 1943, and couldn't deduct them until they filed their 1943 taxes. VPF argued that Vander Poel and Francis could have cashed their checks whenever they wanted, it was out of VPF's control. As soon as the checks were signed, the money was effectively out of their hands. Therefore they 'paid' the salaries in 1942. The Tax Court found for the IRS. The Tax Court found that under the doctrine of constructive receipt, a taxpayer receives property the moment they could pick it up, not the moment they actually pick it up. See Hornung v. Commissioner (47 T.C. 428 (1967)). The Court found that the doctrine of constructive payment seems like it would be a necessary corollary. However, it does not apply. The Court found that the doctrine of constructive receipt was designed to prevent abuses by taxpayers who didn't bother to cash their checks until January in order to delay paying taxes. However, the doctrine of constructive payment isn't necessary to prevent abuses, and therefore the IRS doesn't have to apply it unless a Statute says they have to (and there was no Statute saying they have to). See Martinus & Sons v. Commissioner (116 F.2d 732). Basically, under the doctrine of constructive receipt a taxpayer must report income they gain as soon as they could have received it, even if they don't cash the check for a while. On the other hand, the taxpayer who writes the check cannot deduct the expense until the check is actually cashed, regardless of when it was signed.