Dargo Inc., a calendar year corporation, accrued a $75,000 year-end bonus payable to its CEO in 2015. Dargo and the CEO are not related parties. Dargo paid the bonus to the CEO on February 8, 2016. Dargo can deduct the bonus in 2015.

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According to the accrual method of accounting, expenses can be recognized in the period in which they are incurred, regardless of when they are paid. Since the bonus was accrued in 2015, Dargo can deduct it in 2015 even if it was paid in 2016.

Dargo Inc, a Calendar Year Corporation, Accrued a $75,000 Year-End Bonus