Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2018, and received a check in full payment from the client on January 12, 2019. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2018.

Question

Quizplus · Accepted Answer

Since Poole is a cash basis taxpayer, it only reports income when it receives it. Therefore, the $1,675 should be reported as income in 2019 when it was received, not in 2018 when the services were billed.

Poole Services, a Calendar Year Taxpayer, Billed a Client for $1,675