Deferred revenue

[ILLMAS]

Cash basis TP finds heavy duty equipment for his clients, in December 2020 he received a large payment for some equipment, the seller was closed for the holidays and was not able to bill or ship the product until January 2021.  In a normal situation, TP will receive the payment, wires it to the seller (less a commission), arranges for freight and the transaction is completed within a couple of days (independently of how long it will take to ship and arrive); deferred revenue comes to mind, but they are on the cash basis, what do you recommend in this situation?

Thanks

 

[Corduroy Frog]

Illegitimas, my opinion is that this very thing is what cash basis is all about.  Report as revenue in the year received, rare issues not withstanding.

Same thing would apply in reverse.  A large deposit paid for unfulfilled performance would be deductible.  There may be exceptions, but in general I think this is what you get when you choose cash basis.

[Abby Normal]

For the amount that goes to the seller, set it up as an other liability since it's not income to the broker, ever. He's just holding the money.

The commission portion should be reported as income.

[Corduroy Frog]

Apologize, ILLMAS, but Abby is correct.  I didn't read deep enough into your post to ascertain that some of this money would never result in income.