§455 Prepaid Subscription Income

Summary

You must report prepaid subscription money as income for the years when you still owe delivery of the newspaper, magazine, or periodical. If your delivery obligation ends, any prepaid amounts you did not yet report must be reported in the year the obligation ends. If you die or your business stops, any unpaid prepaid subscription money must be reported in the year of death or when the business ends. You can use these special rules only if you choose them for the business that gets the subscription payments. You cannot choose them if you use the cash receipts and disbursements method. The choice covers all prepaid subscription money for that business, but you may instead report the whole amount in the year you get it if the delivery obligation will end within 12 months. The choice cannot apply to amounts received before the first taxable year you make the choice. You may make the choice anytime with the Secretary’s consent, or without consent for the first year you get prepaid subscriptions if you make the choice by the time you file that year’s return (including extensions). Once made, the choice stays for that year and later years unless the Secretary agrees to revoke it. Definitions: prepaid subscription income = payments for subscriptions that cover time past the tax year; liability = the duty to deliver the periodical; receipt = treated as received in the year it must be included under the normal income rules. If you used a consistent method for these receipts before the rule began, you may keep using that method.