With respect to the unearned income from services, which of the following is true? a. An accrual basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed within three years following the year of receipt. b. The treatment of unearned income is the same for tax and financial accounting for both cash and accrual basis taxpayers. c. A cash basis taxpayer must report all of the income in the year received. d. An accrual basis taxpayer can spread the income over the period services are to be provided on a contract for three years or less. e. None of these choices are correct.

c. A cash basis taxpayer must report all of the income in the year received.

Explanation:

As a standard, all individuals and business entities are required by law to pay their taxes to the government at a specific period of time.

With respect to the unearned income from services, a cash basis taxpayer must report all of the income in the year received, whether as property or in cash. This simply means that, a cash basis taxpayer can neither deduct promissory notes or checks as payments nor report receivables as income because all of the expenses and income must be reported in the year they were received or paid.

However, not all taxpayers are permitted to use the cash basis method of reporting, these include C corporations, tax shelter, partnership with a C corporation etc.