Tony,a cash basis taxpayer,took out a 12-month business loan on December 1,2010.He prepaid all $4,200 of the interest on the loan on December 1,2010.Tony can deduct all $4,200 of the prepaid interest in 2010.

Question

Quizplus · Accepted Answer

Under cash basis accounting, prepaid interest must be amortized over the period of the loan, so Tony cannot deduct the entire $4,200 in 2010.

Tony,a Cash Basis Taxpayer,took Out a 12-Month Business Loan on December