Question

Norah, who gives music lessons, is a calendar year taxpayer using the cash basis method of accounting. On October 1 of this year, she received $1,200 for a one-year contract beginning on that date to provide 10 lessons. She gave 6 lessons this year. How much should Norah include in income this year?

Answer 1

She must include $1200 as a whole in the income for the year.

Step-by-step explanation:

As Norah has opted cash basis tax calculation. So the amount she would receive as an advance revenue or money that she has received for the previous year services delivered, must be included in the income for the year.

This means the total amount for her services that either she has delivered or she will deliver in the near future must be included in Income. The amount received in the year is $1200 only which will be included in the income for the year.