Mike Operates a Fishing Outfitter as an Accrual-Method Sole Proprietorship

question 74

Essay

Mike operates a fishing outfitter as an accrual-method sole proprietorship. On March 1 ^st of this year, Mike received $15,000 for three outfitting trips. This is the first time Mike agreed to such a payment and he is obligated to outfit one trip per year for the next three summers, beginning this year. How much income must Mike recognize in each of the next three years if he is attempting to minimize his tax burden?

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Definitions:

Contractually-agreed-upon

Refers to terms, conditions, or actions that the parties to a contract have expressly decided upon and recorded in the contract.

Breach of Contract

An act of failing to fulfill obligations or terms agreed upon in a contract, which can result in legal action.

Shorter Time Period

A compressed or reduced duration in comparison to a standard or expected timeframe.

Breached Contract

A situation where one party fails to fulfill their obligations under a contract, resulting in a violation of the agreement.