Conduct research into the question

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Problem -

Lexington Cable Company (LCC), a regulated Kentucky utility and an accrual-basis taxpayer, requires that customers who have uncertain credit must make deposits with it in order to assure prompt payment of future cable bills. Before termination of service, customers who satisfy a credit test can attain a refund of their deposits or can choose to have the amount applied against future bills. While the deposits are at all times subject to the company's use and control, LCC does not treat them as income at the time of receipt but carries them on its books as current liabilities. Upon audit of LCC's returns for the tax years at issue, the Internal Revenue Service asserted deficiencies, claiming that the deposits are advance payments for cable and, therefore, are taxable to LCC in the year of receipt. LCC has now come to you for advice.

Conduct research into the question and provide LCC with a letter asserting your opinion based on your research.

Reference no: EM131563058

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