GH&F is a calendar year, accrual basis taxpayer. In October 2020, GH&F received a $18,000 cash payment from a tenant who leases space in a commercial office building that GH&F owns. The payment was rent for the 18-month period beginning on November 1, 2020. As a result of the payment, GH&F should report:

Question

Quizplus · Accepted Answer

GH&F, as an accrual basis taxpayer, recognizes income when it is earned. For book purposes, only the rent for November and December 2020 ($2,000) is earned in 2020. However, for tax purposes, the entire $18,000 is recognized as taxable income in 2020 because it was received in advance.

GH&F Is a Calendar Year, Accrual Basis Taxpayer