With Respect to Income from Services, Which of the Following

question 39

Multiple Choice

With respect to income from services, which of the following is true?

• A)The income is always amortized over the period the services will be rendered by an accrual basis taxpayer.
• B)A cash basis taxpayer can spread the income from a 24-month service contract over the contract period.
• C)If an accrual basis taxpayer sells a 36-month service contract on July 1, 2012 for $3,600, the taxpayer's 2013 gross income from the contract is $3,000.
• D)If an accrual basis taxpayer sells a 12-month service contract on July 1, 2012, all of the income is recognized in 2012.
• E)None of the above.

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Definitions:

Seller and Lessor

Terms referring to parties in transactions where goods are sold (seller) or property is leased (lessor) to another party.

Specific Performance

A legal remedy in contract law requiring the breaching party to fulfill the exact terms of the contract, rather than merely compensating the aggrieved party with damages.

Sale of Goods

A transaction in which property consisting of tangible personal items is transferred from seller to buyer for a price.

Reselling the Defective Fixtures

The act of selling goods that have flaws or defects not corrected by the seller, often at a reduced price.