## Facts

- J. D. Amend, a wheat farmer, and his wife, Eva Amend, lived in Texas and filed federal income tax returns on a community-property basis for the years at issue.
- The Amends used the cash method of accounting.
- In 1944, J. D. Amend sold wheat to Burrus Mill & Elevator Company under an arm’s-length contract that set payment for January 1945, although the wheat was delivered in August 1944.
- The Amends reported the wheat-sale income in the year they actually received and cashed the check (e.g., 1945 for the 1944 delivery).
- After audit, the Commissioner increased the Amends’ reported income for 1944 and 1946 by treating certain wheat-sale proceeds as constructively received in the earlier year based on credits and/or year-end sales where checks were received or deposited in the following January.
- The Commissioner issued deficiency notices reflecting these adjustments; 1945 was not before the court because the Commissioner had determined an overassessment for that year.
- The Amends petitioned the United States Tax Court to redetermine the deficiencies.

## Issues

1. Whether wheat-sale proceeds were constructively received in the year of delivery/crediting (e.g., 1944 and 1946) when the sales contracts and payment practices provided for payment in the following year.
2. Whether the Amends had an unrestricted, present right to demand payment before the contract payment date such that the cash-method rule was displaced by constructive receipt.

## Decision

- The Tax Court ruled for the Amends on the constructive-receipt issue.
- The court held that the wheat-sale proceeds were includible in income when actually received, consistent with the cash method.
- The court rejected the Commissioner’s position that the taxpayers had an “unqualified right” to the proceeds in the earlier year.
- The deficiencies for 1944 and 1946 were not sustained to the extent they depended on constructive-receipt treatment of the wheat-sale proceeds.

## Legal Principles

- Under the constructive receipt doctrine, a cash-method taxpayer includes income when it is actually received or when it is made available without substantial restrictions so that the taxpayer has a present, unrestricted right to take it.
- Constructive receipt does not arise merely because payment is expected or because the payor records a credit; the taxpayer must have practical and contractual ability to obtain payment at will.
- A bona fide, arm’s-length deferred-payment sales contract that fixes payment in a later year, without giving the seller a right to accelerate payment, generally prevents constructive receipt before the contract payment date.
- The timing rule for cash-method taxpayers differs from accrual-method recognition; delivery of goods and the purchaser’s promise to pay later do not alone cause current-year income to a cash-method seller absent constructive receipt.

## Conclusion

The Tax Court concluded that cash-basis farmers who sold wheat under bona fide contracts requiring payment in a later year did not constructively receive the proceeds in the year of delivery or crediting because they lacked a present, unrestricted right to demand earlier payment; the income was taxable when the checks were actually received.


Amend v. Commissioner, 13 T.C. 178 (T.C. 1949)