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Deferred revenue


ILLMAS

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Cash basis TP finds heavy duty equipment for his clients, in December 2020 he received a large payment for some equipment, the seller was closed for the holidays and was not able to bill or ship the product until January 2021.  In a normal situation, TP will receive the payment, wires it to the seller (less a commission), arranges for freight and the transaction is completed within a couple of days (independently of how long it will take to ship and arrive); deferred revenue comes to mind, but they are on the cash basis, what do you recommend in this situation?

Thanks

 

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Illegitimas, my opinion is that this very thing is what cash basis is all about.  Report as revenue in the year received, rare issues not withstanding.

Same thing would apply in reverse.  A large deposit paid for unfulfilled performance would be deductible.  There may be exceptions, but in general I think this is what you get when you choose cash basis.

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