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Both Larry and Wendy are calendar-year, cash method taxpayers. The lease requires an annual rental of $2,000, due in arrears (meaning at the end of the term) on December 31.

(a) On December 31, 206, Wendy went to Larry’s office with a check that Larry refused to accept, telling Wendy to mail it. She did, and he received the check on January 2, 2017.

(b) Wendy telephoned Larry on December 31, 2016 and informed him that she had written the check, but could not get away from the ski lodge, and that he could pick it up if he desired. Larry did not pick up the check. Wendy mailed it on January 2, 2017 and Larry received it on January 5, 2017. Does it matter where Larry was, and when he received the telephone call?

Required: Discuss the tax consequences to Larry and Wendy, of the above alternative rental payments.

A partial list of recommended research sources is:

• Constructive receipt

• Reg. 1.451-2(a)

• IRC 451

• Davis v. Commissioner, 37 T.C.M 42 (1978)

• Reedy v. Commissioner, 42 T.C.M. 1401 (1981)

• IRC 162

• Online resources

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