The tax law does not allow deductions for estimated expenses that result in an allowance or reserve for financial statement purposes.

Question

Quizplus · Accepted Answer

This is known as the "all events test" and a deduction is only allowed when all events that determine the liability have occurred and the amount can be determined with reasonable accuracy. Creating an allowance or reserve for estimated expenses does not meet this test.

The Tax Law Does Not Allow Deductions for Estimated Expenses