Chicago Cleaning Services provides nightly janitorial services at a monthly rate of $300.Customers have three payment options:
$\begin{array}{ll}
\text { Month-by-month payments } & \$ 300 \
\text { One year advance payment } & 3,360 (\$ 280 \text { per month)}\
\text { Two year advance payment } & 6,480(\$ 270 \text {per month)}
\end{array}$
If Chicago Cleaning is a cash basis taxpayer:
I.All cash payments are taxable when they are received.
II.One-year advance payments may be deferred: $280 would be included in income for each month of service provided.

Question

Quizplus · Accepted Answer

For a cash basis taxpayer, income is recognized when cash is received, so all cash payments are taxable when received. Statement II is incorrect because cash basis taxpayers cannot defer income recognition.

Chicago Cleaning Services Provides Nightly Janitorial Services at a Monthly