Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2016, and received a check in full payment from the client on January 12, 2017. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2016.

Question

Quizplus · Accepted Answer

Since Poole is a cash basis taxpayer, it reports income in the year it is received, not earned. Therefore, the $1,675 payment received on January 12, 2017, should be reported as income in 2017, not 2016.

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