[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.451-1]

[Page 109-110]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.451-1  General rule for taxable year of inclusion.

    (a) General rule. Gains, profits, and income are to be included in 
gross income for the taxable year in which they are actually or 
constructively received by the taxpayer unless includible for a 
different year in accordance with the taxpayer's method of accounting. 
Under an accrual method of accounting, income is includible in gross 
income when all the events have occurred which fix the right to receive 
such income and the amount thereof can be determined with reasonable 
accuracy. Therefore, under such a method of accounting if, in the case 
of compensation for services, no determination can be made as to the 
right to such compensation or the amount thereof until the services are 
completed, the amount of compensation is ordinarily income for the 
taxable year in which the determination can be made. Under the cash 
receipts and disbursements method of accounting, such an amount is 
includible in gross income when actually or constructively received. 
Where an amount of income is properly accrued on the basis of a 
reasonable estimate and the exact amount is subsequently determined, the 
difference, if any, shall be taken into account for the taxable year in 
which such determination is made. To the extent that income is 
attributable to the recovery of bad debts for accounts charged off in 
prior years, it is includible in the year of recovery in accordance with 
the taxpayer's method of accounting, regardless of the date when the 
amounts were charged off. For treatment of bad debts and bad debt 
recoveries, see sections 166 and 111 and the regulations thereunder. For 
rules relating to the treatment of amounts received in crop shares, see 
section 61 and the regulations thereunder. For the year in which a 
partner must include his distributive share of partnership income, see 
section 706(a) and paragraph (a) of Sec. 1.706-1. If a taxpayer 
ascertains that an item should have been included in gross income in a 
prior taxable year, he should, if within the period of limitation, file 
an amended return and pay any additional tax due. Similarly, if a 
taxpayer ascertains that an item was improperly included in gross income 
in a prior taxable year, he should, if within the period of limitation, 
file claim for credit or refund of any overpayment of tax arising 
therefrom.
    (b) Special rule in case of death. (1) A taxpayer's taxable year 
ends on the date of his death. See section 443(a)(2) and paragraph 
(a)(2) of Sec. 1.443-1. In computing taxable income for such year, 
there shall be included only amounts properly includible under the 
method of accounting used by the taxpayer. However, if the taxpayer used 
an accrual method of accounting, amounts accrued only by reason of his 
death shall not be included in computing taxable income for such year. 
If the taxpayer uses no regular accounting method, only amounts actually 
or constructively received during such year shall be included. (For 
rules relating to the inclusion of partnership income in the return of a 
decedent partner, see subchapter K, chapter 1 of the Code, and the 
regulations thereunder.)
    (2) If the decedent owned an installment obligation the income from 
which was taxable to him under section 453, no income is required to be 
reported in the return of the decedent by reason of the transmission at 
death of such obligation. See section 453(d)(3). For the treatment of 
installment obligations acquired by the decedent's estate or by any 
person by bequest, devise, or inheritance from the decedent, see section 
691(a)(4) and the regulations thereunder.

[[Page 110]]

    (c) Special rule for employee tips. Tips reported by an employee to 
his employer in a written statement furnished to the employer pursuant 
to section 6053(a) shall be included in gross income of the employee for 
the taxable year in which the written statement is furnished the 
employer. For provisions relating to the reporting of tips by an 
employee to his employer, see section 6053 and Sec. 31.6053-1 of this 
chapter (Employment Tax Regulations).
    (d) Special rule for ratable inclusion of original issue discount. 
For ratable inclusion of original issue discount in respect of certain 
corporate obligations issued after May 27, 1969, see section 1232(a)(3).
    (e) Special rule for inclusion of qualified tax refund effected by 
allocation. For rules relating to the inclusion in income of an amount 
paid by a taxpayer in respect of his liability for a qualified State 
individual income tax and allocated or reallocated in such a manner as 
to apply it toward the taxpayer's liability for the Federal income tax, 
see paragraph (f)(1) of Sec. 301.6361-1 of this chapter (Regulations on 
Procedure and Administration).
    (f) Timing of income from notional principal contracts. For the 
timing of income with respect to notional principal contracts, see Sec. 
1.446-3.
    (g) Timing of income from section 467 rental agreements. For the 
timing of income with respect to section 467 rental agreements, see 
section 467 and the regulations thereunder.

[T.D. 6500, 25 FR 11709, Nov. 26, 1960, as amended by T.D. 7001, 34 FR 
997, Jan. 23, 1969; T.D. 7154, 36 FR 24996, Dec. 28, 1971; 43 FR 59357, 
Dec. 20, 1978; T.D. 8491, 58 FR 53135, Oct. 14, 1993; T.D. 8820, 64 FR 
26851, May 18, 1999]