Final answer:
No, Juan did not constructively receive $3 million in 2015 because the funds were neither credited to his account nor made available to him in 2015. His constructive receipt of income would start in 2016 when the first installment of $900,000 was received as per the agreed payment schedule.
Step-by-step explanation:
The question relates to the concept of constructive receipt in tax law, which is particularly relevant for cash basis taxpayers like Juan. The principle of constructive receipt states that income is considered received when it is credited to the taxpayer's account or made available to them without restriction, rather than when actually received. In Juan's case, the question asks if he constructively received $3 million in 2015 when he was offered that amount, despite his counteroffer resulting in $900,000 per year for 4 years starting in 2016.
No, Juan did not constructively receive $3 million in 2015 because the money was neither credited to his account nor made available without restriction in that year. Instead, he reached an agreement for a deferred payment plan starting in 2016. Thus, for tax purposes, his income for 2015 would not include the $3 million, as he did not have control or access to that money in that tax year.This situation is an example of how the method of receiving payment can affect the tax treatment. In Juan's case, he chose to receive the payments over a period of four years, which would affect how the income is reported and taxed.