Ivory Fast Delivery Company, an accrual basis taxpayer, frequently has claims for damages to property the company delivered. Often the claim is not filed until a month after the delivery. In the past, approximately 80% of the claims are paid by Ivory. In 2014, claims for $80,000 were filed. The company refused to pay $20,000 of the claims (because they were not valid), and paid $50,000. The remaining $10,000 in claims were processed and paid in January 2015. Also, in January 2015, claims for $8,000 were filed for deliveries made in 2014, and $6,000 was paid on these claims by March 15, 2015. Ivory has not elected to use the recurring item exception to economic performance. Under the all-events and economic performance tests, Ivory can accrue as an expense for 2014:

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Under the all-events and economic performance tests, Ivory can only accrue expenses that have been incurred and for which economic performance has occurred. In 2014, Ivory paid $50,000 in claims, which satisfies these criteria. The remaining claims paid in 2015 do not meet the economic performance test for 2014.

Ivory Fast Delivery Company, an Accrual Basis Taxpayer, Frequently Has