Recommended treatment for the disputed income

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Reference no: EM13987719

Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis taxpayer that repairs automobiles. In late December 2015, the company repaired Samuel Mosley's car and charged him $1,000. Samuel did not think the prob- lem had been fixed and refused to pay; thus, Trip refused to release the automobile. In early January 2016, Trip made a few adjustments and convinced Samuel that the automobile was working properly. At that time, Samuel agreed to pay only $900 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 2015, when the work was done, and then deduct a $100 loss in 2016. Prepare a memo to Susan Apple, the treasurer of Trip, with the recommended treatment for the disputed income.

Reference no: EM13987719

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