Clyde operates a sole proprietorship using the cash method. This year Clyde made the follow5i5n)g expenditures:$480 to U.S. Bank for 12 months of interest accruing on a business loan from September 1st of this year through August 31st of next year.$600 for 12 months of property insurance beginning on July 1 of this year.What is the maximum amount Clyde can deduct this year?

Question

Quizplus · Accepted Answer

Clyde can deduct the interest expense for the period from September 1st of this year through December 31st of this year, which is 4 months. The amount of interest expense that Clyde can deduct this year is $480 x 4/12 = $160. Clyde can also deduct the property insurance expense for the period from July 1st of this year through December 31st of this year, which is 6 months. The amount of property insurance expense that Clyde can deduct this year is $600 x 6/12 = $300. Therefore, the maximum amount that Clyde can deduct this year is $160 + $300 = $460.

Clyde Operates a Sole Proprietorship Using the Cash Method