The amount of any item of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period.
In the case of the death of a taxpayer whose taxable income is computed under an accrual method of accounting, any amount accrued only by reason of the death of the taxpayer shall not be included in computing taxable income for the period in which falls the date of the taxpayer's death.
For purposes of subsection (a), tips included in a written statement furnished an employer by an employee pursuant to section 6053(a) shall be deemed to be received at the time the written statement including such tips is furnished to the employer.
In the case of insurance proceeds received as a result of destruction or damage to crops, a taxpayer reporting on the cash receipts and disbursements method of accounting may elect to include such proceeds in income for the taxable year following the taxable year of destruction or damage, if he establishes that, under his practice, income from such crops would have been reported in a following taxable year. For purposes of the preceding sentence, payments received under the Agricultural Act of 1949, as amended, or title II of the Disaster Assistance Act of 1988, as a result of (1) destruction or damage to crops caused by drought, flood, or any other natural disaster, or (2) the inability to plant crops because of such a natural disaster shall be treated as insurance proceeds received as a result of destruction or damage to crops. An election under this subsection for any taxable year shall be made at such time and in such manner as the Secretary prescribes.
In the case of income derived from the sale or exchange of livestock in excess of the number the taxpayer would sell if he followed his usual business practices, a taxpayer reporting on the cash receipts and disbursements method of accounting may elect to include such income for the taxable year following the taxable year in which such sale or exchange occurs if he establishes that, under his usual business practices, the sale or exchange would not have occurred in the taxable year in which it occurred if it were not for drought, flood, or other weather-related conditions, and that such conditions had resulted in the area being designated as eligible for assistance by the Federal Government.
Paragraph (1) shall apply only to a taxpayer whose principal trade or business is farming (within the meaning of section 6420(c)(3)).
If section 1033(e)(2) applies to a sale or exchange of livestock described in paragraph (1), the election under paragraph (1) shall be deemed valid if made during the replacement period described in such section.
In the case of a taxpayer the taxable income of which is computed under an accrual method of accounting, any income attributable to the sale or furnishing of utility services to customers shall be included in gross income not later than the taxable year in which such services are provided to such customers.
For purposes of this subsection—
The term “utility services” includes—
(i) the providing of electrical energy, water, or sewage disposal,
(ii) the furnishing of gas or steam through a local distribution system,
(iii) telephone or other communication services, and
(iv) the transporting of gas or steam by pipeline.
The taxable year in which services are treated as provided to customers shall not, in any manner, be determined by reference to—
(i) the period in which the customers’ meters are read, or
(ii) the period in which the taxpayer bills (or may bill) the customers for such service.
In the case of interest credited during any calendar year on a frozen deposit in a qualified financial institution, the amount of such interest includible in the gross income of a qualified individual shall not exceed the sum of—
(A) the net amount withdrawn by such individual from such deposit during such calendar year, and
(B) the amount of such deposit which is withdrawable as of the close of the taxable year (determined without regard to any penalty for premature withdrawals of a time deposit).
Any interest not included in gross income by reason of paragraph (1) shall be treated as credited in the next calendar year.
No deduction shall be allowed to any qualified financial institution for interest not includible in gross income under paragraph (1) until such interest is includible in gross income.
For purposes of this subsection, the term “frozen deposit” means any deposit if, as of the close of the calendar year, any portion of such deposit may not be withdrawn because of—
(A) the bankruptcy or insolvency of the qualified financial institution (or threat thereof), or
(B) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in the State.
For purposes of this subsection, the terms “qualified individual”, “qualified financial institution”, and “deposit” have the same respective meanings as when used in section 165(l).
For purposes of this title, in the case of an individual on the cash receipts and disbursements method of accounting, a qualified prize option shall be disregarded in determining the taxable year for which any portion of the qualified prize is properly includible in gross income of the taxpayer.
For purposes of this subsection—
The term “qualified prize option” means an option which—
(i) entitles an individual to receive a single cash payment in lieu of receiving a qualified prize (or remaining portion thereof), and
(ii) is exercisable not later than 60 days after such individual becomes entitled to the qualified prize.
The term “qualified prize” means any prize or award which—
(i) is awarded as a part of a contest, lottery, jackpot, game, or other similar arrangement,
(ii) does not relate to any past services performed by the recipient and does not require the recipient to perform any substantial future service, and
(iii) is payable over a period of at least 10 years.
The Secretary shall provide for the application of this subsection in the case of a partnership or other pass-through entity consisting entirely of individuals described in paragraph (1).
In the case of any qualifying electric transmission transaction for which the taxpayer elects the application of this section, qualified gain from such transaction shall be recognized—
(A) in the taxable year which includes the date of such transaction to the extent the amount realized from such transaction exceeds—
(i) the cost of exempt utility property which is purchased by the taxpayer during the 4-year period beginning on such date, reduced (but not below zero) by
(ii) any portion of such cost previously taken into account under this subsection, and
(B) ratably over the 8-taxable year period beginning with the taxable year which includes the date of such transaction, in the case of any such gain not recognized under subparagraph (A).
For purposes of this subsection, the term “qualified gain” means, with respect to any qualifying electric transmission transaction in any taxable year—
(A) any ordinary income derived from such transaction which would be required to be recognized under section 1245 or 1250 for such taxable year (determined without regard to this subsection), and
(B) any income derived from such transaction in excess of the amount described in subparagraph (A) which is required to be included in gross income for such taxable year (determined without regard to this subsection).
For purposes of this subsection, the term “qualifying electric transmission transaction” means any sale or other disposition before January 1, 2008 (before January 1, 2012, in the case of a qualified electric utility), of—
(A) property used in the trade or business of providing electric transmission services, or
(B) any stock or partnership interest in a corporation or partnership, as the case may be, whose principal trade or business consists of providing electric transmission services,
but only if such sale or disposition is to an independent transmission company.
For purposes of this subsection, the term “independent transmission company” means—
(A) an independent transmission provider approved by the Federal Energy Regulatory Commission,
(B) a person—
(i) who the Federal Energy Regulatory Commission determines in its authorization of the transaction under section 203 of the Federal Power Act (16 U.S.C. 824b) or by declaratory order is not a market participant within the meaning of such Commission's rules applicable to independent transmission providers, and
(ii) whose transmission facilities to which the election under this subsection applies are under the operational control of a Federal Energy Regulatory Commission-approved independent transmission provider before the close of the period specified in such authorization, but not later than the date which is 4 years after the close of the taxable year in which the transaction occurs, or
(C) in the case of facilities subject to the jurisdiction of the Public Utility Commission of Texas—
(i) a person which is approved by that Commission as consistent with Texas State law regarding an independent transmission provider, or
(ii) a political subdivision or affiliate thereof whose transmission facilities are under the operational control of a person described in clause (i).
For purposes of this subsection:
The term “exempt utility property” means property used in the trade or business of—
(i) generating, transmitting, distributing, or selling electricity, or
(ii) producing, transmitting, distributing, or selling natural gas.
Acquisition of control of a corporation shall be taken into account under this subsection with respect to a qualifying electric transmission transaction only if the principal trade or business of such corporation is a trade or business referred to in subparagraph (A).
The term “exempt utility property” shall not include any property which is located outside the United States.
For purposes of this subsection, the term “qualified electric utility” means a person that, as of the date of the qualifying electric transmission transaction, is vertically integrated, in that it is both—
(A) a transmitting utility (as defined in section 3(23) of the Federal Power Act (16 U.S.C. 796(23))) with respect to the transmission facilities to which the election under this subsection applies, and
(B) an electric utility (as defined in section 3(22) of the Federal Power Act (16 U.S.C. 796(22))).
In the case of a corporation which is a member of an affiliated group filing a consolidated return, any exempt utility property purchased by another member of such group shall be treated as purchased by such corporation for purposes of applying paragraph (1)(A).
If the taxpayer has made the election under paragraph (1) and any gain is recognized by such taxpayer as provided in paragraph (1)(B), then—
(A) the statutory period for the assessment of any deficiency, for any taxable year in which any part of the gain on the transaction is realized, attributable to such gain shall not expire prior to the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) of the purchase of exempt utility property or of an intention not to purchase such property, and
(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding any law or rule of law which would otherwise prevent such assessment.
For purposes of this subsection, the taxpayer shall be considered to have purchased any property if the unadjusted basis of such property is its cost within the meaning of section 1012.
An election under paragraph (1) shall be made at such time and in such manner as the Secretary may require and, once made, shall be irrevocable.
Section 453 shall not apply to any qualifying electric transmission transaction with respect to which an election to apply this subsection is made.
(Aug. 16, 1954, ch. 736, 68A Stat. 152; Pub. L. 89–97, title III, §313(b), July 30, 1965, 79 Stat. 382; Pub. L. 91–172, title II, §215(a), Dec. 30, 1969, 83 Stat. 573; Pub. L. 94–455, title XIX, §1906(b)(13)(A), title XXI, §§2102(a), (b), 2141(a), Oct. 4, 1976, 90 Stat. 1834, 1900, 1933; Pub. L. 99–514, title VIII, §821(a), title IX, §905(b), Oct. 22, 1986, 100 Stat. 2372, 2386; Pub. L. 100–647, title I, §1009(d)(3), title VI, §§6030(a), 6033(a), Nov. 10, 1988, 102 Stat. 3450, 3694, 3695; Pub. L. 105–34, title IX, §913(a), Aug. 5, 1997, 111 Stat. 878; Pub. L. 105–277, div. J, title V, §5301(a), Oct. 21, 1998, 112 Stat. 2681–918; Pub. L. 108–357, title III, §311(c), title VIII, §909(a), Oct. 22, 2004, 118 Stat. 1467, 1657; Pub. L. 109–58, title XIII, §1305(a), (b), Aug. 8, 2005, 119 Stat. 997; Pub. L. 110–343, div. B, title I, §109(a)–(c), Oct. 3, 2008, 122 Stat. 3821; Pub. L. 111–312, title VII, §705(a), Dec. 17, 2010, 124 Stat. 3311.)
The Agricultural Act of 1949, as amended, referred to in subsec. (d), is act Oct. 31, 1949, ch. 792, 63 Stat. 1051, as amended, which is classified principally to chapter 35A (§1421 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see Short Title note set out under section 1421 of Title 7 and Tables.
The Disaster Assistance Act of 1988, referred to in subsec. (d), is Pub. L. 100–387, Aug. 11, 1988, 102 Stat. 924. Title II of the Disaster Assistance Act of 1988 is set out as a note under section 1421 of Title 7. For complete classification of this Act to the Code, see Tables.
2010—Subsec. (i)(3). Pub. L. 111–312 substituted “January 1, 2012” for “January 1, 2010” in introductory provisions.
2008—Subsec. (i)(3). Pub. L. 110–343, §109(a)(1), inserted “(before January 1, 2010, in the case of a qualified electric utility)” after “January 1, 2008” in introductory provisions.
Subsec. (i)(4)(B)(ii). Pub. L. 110–343, §109(b), substituted “the date which is 4 years after the close of the taxable year in which the transaction occurs” for “December 31, 2007”.
Subsec. (i)(5)(C). Pub. L. 110–343, §109(c), added subpar. (C).
Subsec. (i)(6) to (11). Pub. L. 110–343, §109(a)(2), added par. (6) and redesignated former pars. (6) to (10) as (7) to (11), respectively.
2005—Subsec. (i)(3). Pub. L. 109–58, §1305(a), substituted “2008” for “2007” in introductory provisions.
Subsec. (i)(4)(B)(ii). Pub. L. 109–58, §1305(b), substituted “December 31, 2007” for “the close of the period applicable under subsection (a)(2)(B) as extended under paragraph (2)”.
2004—Subsec. (e)(3). Pub. L. 108–357, §311(c), added par. (3).
Subsec. (i). Pub. L. 108–357, §909(a), added subsec. (i).
1998—Subsec. (h). Pub. L. 105–277 added subsec. (h).
1997—Subsec. (e). Pub. L. 105–34 inserted “, flood, or other weather-related conditions” after “drought” in heading and substituted “drought, flood, or other weather-related conditions, and that such conditions” for “drought conditions, and that these drought conditions” in par. (1).
1988—Subsec. (d). Pub. L. 100–647, §6033(a), inserted “or title II of the Disaster Assistance Act of 1988,” after “the Agricultural Act of 1949, as amended,”.
Subsec. (e)(1). Pub. L. 100–647, §6030(a), struck out “(other than livestock described in section 1231(b)(3))” after “exchange of livestock”.
Subsecs. (f), (g). Pub. L. 100–647, §1009(d)(3), redesignated subsec. (f), relating to treatment of interest on frozen deposits in certain financial institutions, as (g).
1986—Subsec. (f). Pub. L. 99–514, §905(b), added subsec. (f) relating to treatment of interest on frozen deposits in certain financial institutions.
Pub. L. 99–514, §821(a), added subsec. (f) relating to special rule for utility services.
1976—Subsec. (d). Pub. L. 94–455, §§1906(b)(13)(A), 2102(a), (b), inserted reference to disaster payments in heading, provided that payments received under the Agricultural Act of 1949, as amended, be treated as insurance proceeds received as a result of destruction or damage to crops if the payments are received as the result of destruction or damage from drought, flood, or other natural disaster, or as the result of inability to plant crops because of drought, flood, or other natural disaster, and struck out “or his delegate” after “Secretary”.
Subsec. (e). Pub. L. 94–455, §2141(a), added subsec. (e).
1969—Subsec. (d). Pub. L. 91–172 added subsec. (d).
1965—Subsec. (c). Pub. L. 89–97 added subsec. (c).
Pub. L. 109–58, title XIII, §1305(c), Aug. 8, 2005, 119 Stat. 997, provided that:
“(1)
“(2)
Pub. L. 111–312, title VII, §705(b), Dec. 17, 2010, 124 Stat. 3311, provided that: “The amendment made by this section [amending this section] shall apply to dispositions after December 31, 2009.”
Pub. L. 110–343, div. B, title I, §109(d), Oct. 3, 2008, 122 Stat. 3822, provided that:
“(1)
“(2)
“(3)
Pub. L. 108–357, title III, §311(d), Oct. 22, 2004, 118 Stat. 1467, provided that: “The amendments made by this section [amending this section and section 1033 of this title] shall apply to any taxable year with respect to which the due date (without regard to extensions) for the return is after December 31, 2002.”
Pub. L. 108–357, title VIII, §909(b), Oct. 22, 2004, 118 Stat. 1659, provided that: “The amendments made by this section [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Oct. 22, 2004], in taxable years ending after such date.”
Pub. L. 105–277, div. J, title V, §5301(b), Oct. 21, 1998, 112 Stat. 2681–918, provided that:
“(1)
“(2)
“(A) clause (ii) of such section 451(h)(2)(A) shall not apply, and
“(B) such option shall be treated as a qualified prize option if it is exercisable only during all or part of the 18-month period beginning on July 1, 1999.”
Section 913(c) of Pub. L. 105–34 provided that: “The amendments made by this section [amending this section and section 1033 of this title] shall apply to sales and exchanges after December 31, 1996.”
Amendment by section 1009(d)(3) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Section 6030(b) of Pub. L. 100–647 provided that: “The amendment made by subsection (a) [amending this section] shall apply to sales or exchanges occurring after December 31, 1987.”
Section 6033(b) of Pub. L. 100–647, as amended by Pub. L. 101–239, title VII, §7816(g), Dec. 19, 1989, 103 Stat. 2421, provided that: “The amendment made by subsection (a) [amending this section] shall apply to payments received before, on, or after the date of enactment of this Act [Nov. 10, 1988].”
Section 821(b) of Pub. L. 99–514, as amended by Pub. L. 100–647, title I, §1008(h), Nov. 10, 1988, 102 Stat. 3444, provided that:
“(1)
“(2)
“(A) such change shall be treated as initiated by the taxpayer,
“(B) such change shall be treated as having been made with the consent of the Secretary, and
“(C) the adjustments under section 481 of the Internal Revenue Code of 1954 [now 1986] by reason of such change shall be taken into account ratably over a period no longer than the first 4 taxable years beginning after December 31, 1986.
“(3)
Section 905(c) of Pub. L. 99–514, as amended by Pub. L. 100–647, title I, §1009(d)(2), Nov. 10, 1988, 102 Stat. 3450, provided that:
“(1)
“(2)
“(A) The amendment made by subsection (b) [amending this section] shall apply to taxable years beginning after December 31, 1982, and before January 1, 1987, only if the qualified individual elects to have such amendment apply for all such taxable years.
“(B) In the case of interest attributable to the period beginning January 1, 1983, and ending December 31, 1987, the interest deduction of financial institutions shall be determined without regard to paragraph (3) of section 451(f) of the Internal Revenue Code of 1986 (as added by subsection (b)).”
Section 2102(c) of Pub. L. 94–455 provided that: “The amendments made by this section [amending this section] shall apply to payments received after December 31, 1973, in taxable years ending after such date.”
Section 2141(b) of Pub. L. 94–455 provided that: “The amendment made by this section [amending this section] applies to taxable years beginning after December 31, 1975.”
Section 215(b) of Pub. L. 91–172 provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Dec. 30, 1969].”
Amendment by Pub. L. 89–97 applicable only with respect to tips received by employees after 1965, see section 313(f) of Pub. L. 89–97, set out as an Effective Date note under section 6053 of this title.
Voluntary separation incentives paid to members of Armed Forces under 10 U.S.C. 1175 as includable in gross income only for taxable year in which incentive is paid, see section 662(b) of Pub. L. 102–190, set out as a note under section 1175 of Title 10, Armed Forces.
For provisions relating to credit or refund of overpayments of tax, and assessment of underpayments of tax, due to amendments by section 905 of Pub. L. 99–514 or section 1009(d) of Pub. L. 100–647, see section 1009(d)(4) of Pub. L. 100–647, set out as a note under section 165 of this title.
Pub. L. 97–248, title II, §229, Sept. 3, 1982, 96 Stat. 493, as amended by Pub. L. 98–369, div. A, title VII, §712(m), July 18, 1984, 98 Stat. 955, provided that:
“(a)
“(1) clarify the time at which a contract is to be considered completed,
“(2) clarify when—
“(A) one agreement will be treated as more than one contract, and
“(B) two or more agreements will be treated as one contract, and
“(3) properly allocate all costs which directly benefit, or are incurred by reason of, the extended period long-term contract activities of the taxpayer.
“(b)
“(1)
“(2)
“(A)
“(i) who estimates (at the time such contract is entered into) that such contract will be completed within the 3-year period beginning on the contract commencement date of such contract, or
“(ii) whose average annual gross receipts over the 3 taxable years preceding the taxable year in which such contract is entered into do not exceed $25,000,000.
“(B)
“(i) all trades or businesses (whether or not incorporated) which are under common control with the taxpayer (within the meaning of section 52(b)), and
“(ii) all members of any controlled group of corporations of which the taxpayer is a member,
for the 3 taxable years of such persons preceding the taxable year in which the contract described in subparagraph (A) is entered into shall be included in the gross receipts of the taxpayer for the period described in subparagraph (A). The Secretary shall prescribe regulations which provide attribution rules that take into account, in addition to the persons and entities described in the preceding sentence, taxpayers who engage in construction contracts through partnerships, joint ventures, and corporations.
“(C)
“(i) ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in section 1563(a)(1), and
“(ii) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
“(3)
“(4)
“(c)
“(1)
“(2)
“(A)
“(B)
“If the taxable year begins
in calendar year:
“(3)
“(A)
“(B)
“(i) solely by reason of any modification to regulations made under subsection (a)(2), or
“(ii) solely by reason of any modifications to regulations made under both paragraphs (1) and (2) of subsection (a),
shall be treated as having been completed on the first day after December 31, 1982, on which any contract which was severed from such contract (by reason of the modifications made by subsection (a)(2)) is completed (determined after the application of any modifications to regulations made under subsection (a)(1)).
“(4)
Pub. L. 95–600, title I, §132, Nov. 6, 1978, 92 Stat. 2782, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(a)
“(b)
“(1)
“(A) where the person for whom the service is performed is not a State (within the meaning of paragraph (1) of section 457(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) and not an organization which is exempt from tax under section 501 of such Code, and
“(B) under which the payment or otherwise making available of compensation is deferred.
“(2)
“(A) a plan described in section 401(a) of the Internal Revenue Code of 1986 which includes a trust, exempt from tax under section 501(a) of such Code,
“(B) an annuity plan or contract described in section 403 of such Code,
“(C) a qualified bond purchase plan described in section 405(a) of such Code,
“(D) that portion of any plan which consists of a transfer of property described in section 83 (determined without regard to subsection (e) thereof of such Code, and
“(E) that portion of any plan which consists of a trust to which section 402(b) of such Code applies.
“(c)
Pub. L. 95–258, §1, Apr. 7, 1978, 92 Stat. 195, provided that:
“(a)
“(1)(A) the taxpayer receives in his first taxable year beginning in 1978 payments under the Agricultural Act of 1949, as amended, [see Short Title note set out under section 1421 of Title 7, Agriculture], as a result of—
“(i) the destruction or damage to crops caused by drought, flood, or any other natural disaster, or
“(ii) the inability to plant crops because of such a natural disaster, and
“(B) the taxpayer establishes that, under his practice, income from such crops could have been reported for his last taxable year beginning in 1977, or
“(2)(A) the taxpayer receives in his first taxable year beginning in 1978 deficiency (or ‘target price’) payments under the Agricultural Act of 1949, as amended, for any 1977 crop, and
“(B) the fifth month of such crop's marketing year ends before December 1, 1977,
then the taxpayer may elect to include such proceeds in income for his last taxable year beginning in 1977.
“(b)