With respect to income from services,which of the following is true?
A)The income is always amortized over the period the services will be rendered by an accrual basis taxpayer.
B)A cash basis taxpayer can spread the income from a 24-month service contract over the contract period.
C)If an accrual basis taxpayer sells a 36-month service contract on July 1,2016 for $3,600,the taxpayer's 2016 gross income from the contract is $600.
D)If an accrual basis taxpayer sells a 24-month service contract on July 1,2016,one-half (12/24)the income is recognized in 2017.
E)None of these.

Question

Quizplus · Accepted Answer

For an accrual basis taxpayer, income from services is recognized when the services are performed, regardless of when payment is received. Therefore, if the taxpayer sells a 36-month service contract on July 1, 2016 for $3,600, the taxpayer's 2016 gross income from the contract is $600 (which is 1/36th of the total contract price). Choices A, B, D are incorrect as they provide incorrect information about recognizing income from services.

With Respect to Income from Services,which of the Following Is