A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

Question

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Generally Accepted Accounting Principles (GAAP) allow for the recognition of revenue when it is earned, not necessarily when it is received. This principle is in contrast to the described provision that requires tax on prepaid income to be paid in the year received.

A Provision in the Law That Compels Accrual Basis Taxpayers