GH&F is a calendar year, accrual basis taxpayer. In October 2015, 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, 2015. As a result of the payment, GH&F should report:

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As GH&F is an accrual basis taxpayer, they must recognize income when it is earned, regardless of when payment is received. Therefore, GH&F should report $2,000 of book income in 2015 ($18,000 rent / 18 months = $1,000 per month x 2 months in 2015 = $2,000) and $18,000 of taxable income in 2015.

GH&F Is a Calendar Year, Accrual Basis Taxpayer