Question

3. True or False. An advance payment received in June 2019 by an accrual basis and calendar year taxpayer for services to be provided over a 36-month period, can be spread over the 36 month period for tax reporting purposes?

Answer 1

Solution: The Answer is TRUE

Explanation:

1) If Accounting has been shown under accrual basis, Any revenue or payment should be reported when services are provided or taken rather than on the date of receipt or payment.

2) In this question, An advance payment is received in June 2019 for services to be provided over next 36 months

3) As per accrual basis of accounting, such advance should recognize as revenue over the next 36 months rather than June 2019.

4) So, advance can be spread over the 36 month period for tax reporting purpose.