Economic benefit doctrine
Certified Financial Planner glossary · Certified Financial Planner
Definition
The doctrine taxing a taxpayer currently where funds are irrevocably set aside beyond the reach of the payor’s creditors.
Economic benefit doctrine in plain English
An employer parks a bonus in a trust the company's creditors cannot touch, then tells the employee "relax, you are not taxed until you withdraw." Economic benefit doctrine often disagrees. Once funds are irrevocably set aside beyond the payor's creditors, the taxpayer can be taxed currently even if cash has not hit the checking account. Contrast constructive receipt (access or control) with this set-aside test. Irrevocable funding outside creditor reach is the tell for current inclusion under this doctrine.
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