On January 1,2014,an accrual basis taxpayer entered into a contract to provide termite inspection service each month for 36 months.The amount received for the contract was $2,400.The taxpayer should report $1,600 of income in 2015.

Question

Quizplus · Accepted Answer

The prepaid income cannot be deferred beyond the tax year following the year of receipt.
Therefore,the taxpayer should report $800 of income in 2014 and $1,600 in 2015.

On January 1,2014,an Accrual Basis Taxpayer Entered into a Contract