Eaton Inc. is a calendar year, cash basis taxpayer. On October 1, 2012, 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 the portion of the expense that applies to the current year. For 2012, Eaton can deduct the cost for October to December, which is $600. The remaining amount is deducted in the years the services are provided: $2,400 in 2013 and $1,800 in 2014.

Eaton Inc Is a Calendar Year, Cash Basis Taxpayer