Clyde operates a sole proprietorship using the cash method. This year Clyde made the following expenditures: $480 to U.S. Bank for 12 months of interest accruing on a business loan from September 1st of this year through August 31st of next year.
$600 for 12 months of property insurance beginning on July 1 of this year.
What is the maximum amount Clyde can deduct this year?

Question

Quizplus · Accepted Answer

Clyde can deduct the interest that accrued during the year, which is $480. He cannot deduct the insurance premium until the insurance coverage begins, which is July 1 of next year.

Clyde Operates a Sole Proprietorship Using the Cash Method