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Posted: September 17th, 2023
Potrus, an accrual basis corporate taxpayer, received a $40,000 advance
In 2007, Potrus, an accrual basis corporate taxpayer, received a $40,000 advance for a series of eight lectures by various employees for the Art Institute. After delivering five lectures, the series was cancelled for poor attendance. Potrus refused to return any of the advance payment, so the Art Institute sued. In 2008, Potrus was ordered by the court to repay $15,000. Potrusâs net income was $426,000 in 2007 and $298,000 in 2008. How should Potrus treat the repayment to obtain the best tax result?
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