Service Contract Income

[equinecpa]

Taxpayer formed an LLC in Jan 2016 (first year of business). Entered into a contract to provide one year of services starting Feb 2016-was prepaid for whole contract.

Since this is a new LLC can taxpayer just elect accrual treatment and treat one month of income as 2017 income to match the provision of actual services?

It appears that a cash taxpayer can also elect to defer including income received for services to be provided within one year of contract-I've read through pub 538 and am not clear on the criteria? If this is a one time service contract is this section applicable? Would taxpayer have to file form 3115?

TIA

CArolyn

[Roland Slugg]

Since this is a new LLC can taxpayer just elect accrual treatment and treat one month of income as 2017 income to match the provision of actual services?

Yes, as long as it's reported the same way on the LLC's financial statements. The deferral of advance payments can not extend beyond the end of the year after the year payment is received. See Regs §1.451-5 (various portions).

Regarding your other question, no this is not available for a cash method taxpayer.