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bulletin Internal Revenue›Rev. Proc. 90-63, 1990-2 C.B. 664, is

SECTION 2. BACKGROUND

Internal Revenue Bulletin 1997-33 · 2026-10-03 edition · updated 2026-10-04 · United States

.01 In general, payments received by an accrual method taxpayer for services to be performed in the future must be included in gross income in the taxable year of receipt. The Commissioner recognizes that this treatment has resulted in a significant and unique cash flow prob

lem for certain accrual method taxpayers that sell multi-year service warranty contracts to customers in connection with the sale of motor vehicles or other durable consumer goods and immediately pay a third-party to insure their risks under the contracts.

.02 Accordingly, these taxpayers will be permitted to adopt or change to a special method of accounting for advance payments that would alleviate the cash flow problem arising in these situations but would generally conform economically to the tax treatment of advance payments under current law. In general, this method of accounting permits these taxpayers to recognize and include in gross income, generally over the period of their service warranty contracts, a series of equal payments, the present value of which equals the portion of the advance payment qualifying for deferral. This method of accounting is described in further detail in section 5 of this revenue procedure.

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▸Contents — Internal Revenue Bulletin 1997-33
Internal Revenue Bulletin 1997-33

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