An accrual basis taxpayer may deduct expenses in the year in which certain tests are met. These tests include
I.when services or property are provided to the taxpayer or when the taxpayer uses the property.
II.when the "all-events test" is met.
III.when "economic performance" has occurred.
IV.when all events have occurred to determine that a liability exists and the amount of the liability can be determined with reasonable accuracy.

A)Only statement I is correct.
B)Only statement II is correct.
C)Statements I and IV are correct.
D)Statements II and III are correct.
E)Statements I, II, III, and IV are correct.

Question

An accrual basis taxpayer may deduct expenses in the year in which certain tests are met. These tests include
I.when services or property are provided to the taxpayer or when the taxpayer uses the property.
II.when the "all-events test" is met.
III.when "economic performance" has occurred.
IV.when all events have occurred to determine that a liability exists and the amount of the liability can be determined with reasonable accuracy.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Statements I and IV are correct.
D)Statements II and III are correct.
E)Statements I, II, III, and IV are correct.

Quizplus · Accepted Answer

All of the statements are correct in regards to when an accrual basis taxpayer may deduct expenses. Statement I refers to the timing of deductions based on the provision of services or property, statement II refers to the "all-events test" which is the point at which income is realized and expenses can be deducted, statement III refers to "economic performance" which means the taxpayer has received the benefit of the expenses incurred, and statement IV refers to the determination of a liability and the accuracy of the amount. Therefore, all four statements are correct.

An Accrual Basis Taxpayer May Deduct Expenses in the Year