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Charles F. Kahler v. Commissioner | 18 T.C. 31 (1952)

Most individual taxpayers are cash-basis taxpayers. This means that the taxpayer reports income in the taxable year in which he or she actually or constructively receives the income. Thus, it’s often not a question of whether the taxpayer received income but when that income was received. In Kahler versus Commissioner, the United States Tax Court considered the timing of the receipt of a last-minute check.

Charles Kahler was a cash-basis taxpayer. Sometime after five p m on December thirty-first, nineteen forty-six, Kahler’s employer gave Kahler a commission check. Because it was after five p m on the last day of the year, it was too late to cash the check at the drawee bank before the year’s end.

On his nineteen forty-six income tax return, Kahler didn’t include the check in his gross income. Kahler asserted that mere receipt of the check didn’t give rise to taxable income because he had insufficient time to convert the check to cash before the end of nineteen forty-six. The commissioner of the internal revenue service disagreed and determined that the check’s cash value was includable in Kahler’s nineteen forty-six gross income. The commissioner assessed a tax deficiency.

Kahler petitioned the United States Tax Court for a redetermination.

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