Hi Team, We were contacted by Steve Orbes, the owner of Orbes Media Inc. with a question regarding the taxability of refunds they have made in January of 2022 for sales made in December 2021. Orbes Media Inc. operates on a calendar year and is on the accrual basis of accounting. As you know, Orbes sells Orbes Magazine which is published 8 times a year. Orbes has a sales agreement with the retail sellers of the magazine that Orbes will refund the retailer for any unsold magazines for a one-month period after purchase. Orbes commits to refund fifty percent of the purchase price of each returned magazine. During December 2022, Orbes sold $5,000,000 of magazines. During January 2022, Orbes refunded $475,000 of the $5,000,000 of sales from December. Specifically, Steve wants to know if his company can reduce Orbes 2021 income by $475,000 that it refunded in January 2022 for the December 2021 sales? Unfortunately, I do not have time to research this issue myself, but I do know that you will need to research Internal Revenue Code Section 458 to determine whether this is includible or excludible from the 2021 income. As you know, Orbes Media Inc. is a valued client of ours and as such I indicated we would get back to them quickly. Please have a Tax Memorandum to me by Sunday at midnight with the relevant information and your conclusion on this matter.