On November 1, 2019, Hernandez Corporation (a cash-basis, calendar-year taxpayer) signed a 36-month lease with Taylor Realty Corporation for rental office space.The market rental rate for this office space is $2,000 per month but Hernandez was able to rent it for $1,900 per month by agreeing to prepay the rent for the entire 36-month period.How much can Hernandez deduct in 2019 rent expense?

Question

Quizplus · Accepted Answer

Hernandez can only deduct the rent expense for the months in 2019. Since the lease starts on November 1, 2019, only two months (November and December) are in 2019. Therefore, the deductible rent expense for 2019 is 2 months x $1,900 = $3,800.

On November 1, 2019, Hernandez Corporation (A Cash-Basis, Calendar-Year Taxpayer)