Tabco Inc., a calendar year, accrual basis corporation, accrued $48,800 wage and salary expense and a corresponding liability at the end of 2018. How much of the accrued expense is deductible in 2018?

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Quizplus · Accepted Answer

According to the IRS, an accrual basis taxpayer can only deduct expenses when they’ve been incurred or earned, regardless of whether or not they’ve been paid. In this case, the corresponding liability indicates that the wage and salary expense has been incurred or earned, therefore, it can be deducted in 2018. However, the deduction is only available for the portion of the expense that is paid by March 15th, the due date of the corporation's tax return, or by the extended due date if an extension is filed. Therefore, option D is the correct answer.

Tabco Inc, a Calendar Year, Accrual Basis Corporation, Accrued $48,800 Wage