Mr. A owns all of the interests in a limited liability company (LLC) that customizes accounting software for business customers. LLC reports its income on the accrual basis and the calendar year. As sole owner, Mr. A must report all of LLC’s income on his joint Federal income tax return. For all years through and including Year 2, LLC followed the practice of booking revenues monthly based on the monthly bills that it issued to its customers. In Year 3, LLC continued this practice with respect to all of its historical customers. However, during Year 3, LLC agreed with one new customer (New Customer) to hold off on billing until the entire project was complete. LLC began work and logged $100,000 of time and other charges during Year 3. LLC completed the project and billed the customer $250,000 in Year 4. What amount(s) should Mr. A include in his income with respect to the New Customer project? I put 100k in year 3, but my professor had $0 for year 3 and 250k for year 4.
Mr. A owns all of the interests in a limited liability company (LLC) that customizes accounting software for business customers. LLC reports its income on the accrual basis and the calendar year. As sole owner, Mr. A must report all of LLC’s income on his joint Federal income tax return.
For all years through and including Year 2, LLC followed the practice of booking revenues monthly based on the monthly bills that it issued to its customers. In Year 3, LLC continued this practice with respect to all of its historical customers. However, during Year 3, LLC agreed with one new customer (New Customer) to hold off on billing until the entire project was complete. LLC began work and logged $100,000 of time and other charges during Year 3. LLC completed the project and billed the customer $250,000 in Year 4.
What amount(s) should Mr. A include in his income with respect to the New Customer project?
I put 100k in year 3, but my professor had $0 for year 3 and 250k for year 4.
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