grandmabee Posted February 3, 2011 Report Share Posted February 3, 2011 partnership return for exercise gym. some clients paid for the full year dues which cover both 2010 and 2011. cash basis taxpayer. I report what is received during 2010 correct? Quote Link to comment Share on other sites More sharing options...
windmill Posted February 3, 2011 Report Share Posted February 3, 2011 Yes Quote Link to comment Share on other sites More sharing options...
Pacun Posted February 4, 2011 Report Share Posted February 4, 2011 It doesn't matter if TP is cash or accrual in this case. Claim of Right Doctrine – This principle states that income should be recognized at the latest when it is received, even if received in error and ultimately repaid. This doctrine rests on the principle that each tax year stands on its own, and if the taxpayer has unrestricted access to the funds at the end of the tax year, such amount is taxable in that tax year. If the amounts are subsequently repaid, a deduction is allowed that year. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 4, 2011 Report Share Posted February 4, 2011 Let add my own twist to this one. If you are doing the books for the gym, it does matter whether the client is cash basis or accrual. If he is accrual basis payer, the income received in 2010 for services in 2011 are funds unearned and are adjusted at the end of the year so as to not overstate income. It is income received during the period but not yet earned. If he is a cash basis tax payer then amounts are reported in the year it was received. So, yes report it this year as your post states he is cash basis Quote Link to comment Share on other sites More sharing options...
Pacun Posted February 4, 2011 Report Share Posted February 4, 2011 Let add my own twist to this one. If you are doing the books for the gym, it does matter whether the client is cash basis or accrual. If he is accrual basis payer, the income received in 2010 for services in 2011 are funds unearned and are adjusted at the end of the year so as to not overstate income. It is income received during the period but not yet earned. If he is a cash basis tax payer then amounts are reported in the year it was received. So, yes report it this year as your post states he is cash basis If the question is about bookeeping, you are correct. If the question is about reporting income on the tax return, I think they have to report all the income in 2010 whether TP is cash or accrual. Quote Link to comment Share on other sites More sharing options...
taxxcpa Posted February 4, 2011 Report Share Posted February 4, 2011 If the question is about bookeeping, you are correct. If the question is about reporting income on the tax return, I think they have to report all the income in 2010 whether TP is cash or accrual. Page 7-5 of the Tax Book: Rental Income Rental income includes any payment received for the use or occupancy of property. In addition to normal rent payments, the following items are reported as rental income: Types of Rental Income Description Advance rent Any amount received prior to the period that the payment covers. Payment for canceling a lease Any amount paid by a tenant to cancel Quote Link to comment Share on other sites More sharing options...
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