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Not secure v2.cengagenow.com ilm takeAssignmen ta eAssignment ain doin kere assignments& ake As a men Sess on o Minnesota State Uni Ch4 Il eBook Calculator Print Item Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis taxpayer that repairs automobiles. In late December 2017, the company repaired Samuel Mosley\'s car and charged him $1.000. Samuel did not think the problem had been fixed and refused to pay; thus, Trip refused to release the automobile. In early January 2018. Trip made a few adjustments and convinced Samuel that the automobile was working properly. At that time, Samuel agreed to pay only s900 because he did not have the use of the car for a week. Trip said \"fine,\" accepted the $900, and released the automobile to Samuel. An IRS agent thinks Trip, as an accrual basis taxpayer, should report $1,000 of income in 2017, when the work was done, and then deduct a $100 loss in 2018. Prepare a memo to Susan Apple, the treasurer of Trip, with the recommended treatment for the disputed income TO: FROM SUBJECT: DATE: Susan Apple Bill Swan Dispute Over Recording of Income by Trip Garage, Inc. October 1, 2018 I am responding to the questions you raised regarding the timing of the reporting of income by Trip Garage, Inc., from repairing Samuel Mosley\'s car. The key issue is whether the Garage should (1) accrue the $1,000 of income in 2017 and take a $100 loss deduction in 2018 (the IRS view) or (2) report the S in 2018 (Trip\'s preferred approach) An accrual basis taxpayer is required to recognize income when (1) all the events have taxpayer\'s right to receive the income and (2) the amount of the income accuracy. In Trip\'s case, it The customer and to establish the be determined with reasonable appear that all the events to fix the rights to the income had 0ccurred in 2017 accept the work by the end of the year. Thus, the transaction should be held open in 2017 Y and related costs should be reported until 2018. Check My Work 1 more Check My Work uses remaining Type here to search

Solution

I am responding to the questions you raised regarding the timing of the reporting of income by Trip Garage, Inc., from repairing Samuel Mosley’s car. The key issue is whether the Garage should (1) accrue the $1,000 of income in 2017 and take a $100 loss deduction in 2018 (the IRS view) or (2) report the $900 in 2018 (Trip’s preferred approach).

An accrual basis tax payer is required to recognize income when (1) all the events have occurred to establish the taxpayers right to receive the income and (2) the amount of income can determined with reasonable accuracy. In Trip’s case, it does not appear that all the events to fix the rights to the income had occurred in 2017. The customer did not accept the work by the end of the year. Thus, the transaction should be held open in 2017 and no income and related costs should be reported until 2018.