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ITG FAQ #10 Answer-What is the Economic Benefit Doctrine?

Generally, a cash basis taxpayer does not recognize income upon the receipt of property in the form of a promise to pay in the future. However, a cash basis taxpayer is taxed when the taxpayer receives an "economic benefit" from a right to receive property in the future. (Sproull v. Commissioner, 16 T.C. 244 (1951)) The economic benefit doctrine has also been applied to require inclusion in income of prize winnings when they are irrevocably placed in a fund to be paid to the winner at a later date. (Pulsifer v. Commissioner, 64 T.C. 245 (1975))

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Page Last Reviewed or Updated: 06-Dec-2016