Full Definition
Constructive receipt is an IRS doctrine that treats funds as received when they become available without restriction to the taxpayer. In 1031 exchanges, if the exchanger takes constructive receipt of sale proceeds (even briefly), the exchange fails. This is why a Qualified Intermediary must hold the funds — preventing constructive receipt.
Related Terms
1031 Exchange (Like-Kind Exchange)
IRS-approved strategy allowing investors to defer capital gains taxes by reinvesting proceeds from sold investment property into like-kind property.
Qualified Intermediary (QI)
IRS-required neutral third party that holds 1031 exchange proceeds and facilitates the transaction.