Eaton Inc. is a calendar year, cash basis taxpayer. On October 1, 2015, 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 $4,800 covers a 24-month period, only the portion applicable to 2015 (3 months) can be deducted in 2015, which is $600. The remaining amount is deducted in the subsequent years as the service is provided.

Eaton Inc Is a Calendar Year, Cash Basis Taxpayer