On December 1, Robert, a cash- method taxpayer, borrows $10,000 from the bank for use in his business. Under the terms of the loan, the bank discounts the loan by $300, paying Robert the $9,700 cash proceeds. If Robert repays the loan next year, he may deduct

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Under the cash method of accounting, expenses are generally deductible in the year they are paid. Since Robert repays the loan next year, he can deduct the $300 discount as interest expense in the year he actually makes the payment, which is next year.

On December 1, Robert, a Cash- Method Taxpayer, Borrows $10,000