Eaton Inc.is a calendar year,cash basis taxpayer.On October 1,2017,Eaton paid $4,800 to a security firm for night-time and weekend security services for the 24-month period beginning with October.Which of the following is true?

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Eaton can only deduct expenses in the year they are paid if they apply to that year. Since the payment covers a 24-month period, only the portion applicable to 2017 can be deducted in that year. The $4,800 covers October 2017 to September 2019, so $600 is deductible in 2017 (for October to December), $2,400 in 2018 (for the full year), and $1,800 in 2019 (for January to September).

Eaton IncIs a Calendar Year,cash Basis Taxpayer