An accrual basis taxpayer can defer all advance payments for services until the services are performed if the method of accounting for the services is the same for tax and financial reporting purposes.

Question

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An accrual basis taxpayer can defer advance payments for services only to the extent allowed by tax regulations, typically recognizing them in the year received or the next year, not indefinitely until services are performed.

An Accrual Basis Taxpayer Can Defer All Advance Payments for Services