Derik Inc., a calendar year, accrual basis corporation, accrued $278,000 vacation pay expense and a corresponding liability at the end of 2018. Derik paid $22,000 of the accrued liability to employees who took vacation between January 1 and March 15, 2019. How much of the accrued vacation pay expense is deductible in 2018?

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Under the accrual method, vacation pay is deductible in the year it is paid if it is paid within 2.5 months after the end of the tax year. Since $22,000 was paid by March 15, 2019, it is deductible in 2018.

Derik Inc, a Calendar Year, Accrual Basis Corporation, Accrued $278,000 Vacation