GH&F is a calendar year, accrual basis taxpayer. In October 2013, 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, 2013. As a result of the payment, GH&F should report:

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GH&F is a calendar year, accrual basis taxpayer, meaning that they report income when it is earned, regardless of when it is received. In this case, the $18,000 cash payment received in October 2013 is considered income earned for the 18-month period beginning on November 1, 2013. Therefore, GH&F should report $2,000 of income for the current year (2013) and should defer $16,000 of income to the following year (2014). This means that book income would be $2,000 and taxable income would be $18,000.

GH&F Is a Calendar Year, Accrual Basis Taxpayer