Section 451 generally governs the timing of income and provides that any item of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period.

Generally, under 451(c), a deferral is permitted to the extent that the advance payment received is not due, paid, earned, or recognized as revenue for an applicable financial statement.   Any remaining portion of such advance payment is recognized in gross income in the taxable year following the taxable year in which such payment is received. Section 451(c) also codifies much of the treatment of advance payments under Rev. Proc. 2004-34 and permits the allocation of the transaction price to performance obligations if consistent with applicable financial statements.