Elcox Company, a calendar year, cash basis taxpayer, paid a $6,340 premium to purchase a casualty insurance policy with a 36-month term. Elcox can deduct $6,340 in the year of payment.

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As a cash basis taxpayer, Elcox can only deduct the portion of the premium that applies to the current tax year. The rest must be prorated and deducted over the policy's term (36 months).

Elcox Company, a Calendar Year, Cash Basis Taxpayer, Paid a $6,340