§455 Prepaid subscription income

Summary

Publishers must include prepaid subscription payments in their taxable income for the years while they still owe deliveries. A taxpayer can use this rule only if they choose it for the trade or business that gets the payments, and only if they are not using the cash receipts and disbursements accounting method. The election covers all prepaid subscription money for that business. However, the taxpayer may choose to report the whole prepaid amount in the year received if the delivery obligation will end within 12 months. The taxpayer can make the election at any time with the Secretary’s consent. Without consent, the taxpayer may make the election for the first year they get prepaid subscriptions, but must do so by the time they file that year’s return (including extensions). The election stays in effect for that year and later years unless the Secretary allows revocation, and it is treated as the taxpayer’s accounting method. If the delivery obligation ends, or if the taxpayer dies or stops existing, any prepaid amounts not yet reported must be included in income in the year the obligation ends or the taxpayer dies or ceases. Prepaid subscription income means amounts received for future delivery of newspapers, magazines, or other periodicals. “Liability” means the obligation to furnish or deliver those periodicals. Such income is treated as received in the year it is includible under section 451. A taxpayer who, before using this rule, reported prepaid subscription income under a consistent established method may keep using that method.