Indicate which of the following statements is/are correct:
I.A cash basis taxpayer may deduct prepaid rent if it will be used-up within one year of prepayment and the payment is required to be made.
II.An accrual basis taxpayer must satisfy an all-events test and an economic performance test to claim a deduction.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Indicate which of the following statements is/are correct:
I.A cash basis taxpayer may deduct prepaid rent if it will be used-up within one year of prepayment and the payment is required to be made.
II.An accrual basis taxpayer must satisfy an all-events test and an economic performance test to claim a deduction.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Both statements are correct. Statement I accurately describes a condition under which a cash basis taxpayer can deduct prepaid rent, focusing on the 12-month rule and the necessity of the payment. Statement II correctly outlines the requirements for an accrual basis taxpayer to claim a deduction, emphasizing the need to pass both the all-events test and the economic performance test.

Indicate Which of the Following Statements Is/are Correct