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Pmarti: "Constructive" receipt. Let's say, for example, that the work was concluded on December 2, 2003. Client stops by friend's office December 3, checkbook in hand, wanting to settle accounts. Friend, who usually bills within a week of completion, stalls until after the first of the year. for the reason stated, before issuing an invoice. Friend had sufficient control over the payment to have constructive receipt in December.

OTOH, we'll go back to our assumption that friend bills once a month. The payment is income when received. (It's a deductible expense to the payor when mailed, so it's entirely possible for a payment to be legitimately a 2003 expense for the client and 2004 income for friend.)"

Foolferlove: "P.S. It turns out that for december she bills on december 23rd, since she does no work over the holidays, so Miss Clio did not need to get involved. It is also possible, and not unlikely, that the client wrote, sealed and mailed the check on December 31st, but it didn't go into the mail until Friday, Jan 2nd, and could reasonably have just gotten to my friend just yesterday."


Foolferlove

<<<<OTOH, we'll go back to our assumption that friend bills once a month. The payment is income when received. (It's a deductible expense to the payor when mailed, so it's entirely possible for a payment to be legitimately a 2003 expense for the client and 2004 income for friend.)>>>>

"Oops, I missed this part of your post when I wrote my post scripts. So technically, my friend can claim the income for 2004 without getting the client "in trouble". "

I cannot tell if you intentionally ignored the first part of Phils' pro post or concluded that it did not apply.

The other part of the explanation as why split years is not necessarily a problem is because the other party may be on an accrual basis, not a cash basis (like your friend).

If your friend billed on 12/23, client cut check on 12/31 and mailed on 12/31 or 1/2 and your friend clearly did not receive check until 1/xx or later, your friend should be fine.

But if client called after 12/23 and asked your friend do you want me to deliver the check to you before year or should I jsut stick in the mail, the constructive receipt issue might still be in play.

Just my $0.02. Regards, JAFO
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