Eaton Inc. is a calendar year, cash basis taxpayer. On October 1, 2016, 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 do not create a benefit extending beyond the end of the next tax year. Since the payment covers services through 2018, Eaton must allocate the deduction over the period the services are provided.

Eaton Inc Is a Calendar Year, Cash Basis Taxpayer