Kate is an accrual basis,calendar-year taxpayer.On November 1,2013,Kate leased out a building for $4,000 a month.On that day Kate received 6 months rental income on the building,a total of $24,000 $4,000 *6 months).How much income must Kate include on her 2013 tax return as a result of this transaction?

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Quizplus · Accepted Answer

Kate must include the entire $24,000 on her 2013 tax return because she is an accrual basis taxpayer. Under the accrual method of accounting, income is recognized when it is earned, regardless of when it is received. In this case, Kate earned the $24,000 in rent on November 1, 2013, even though she did not receive it until later.

Kate Is an Accrual Basis,calendar-Year Taxpayer