Janine,a cash-basis taxpayer,borrowed $15,000 for her business from a local bank three years ago.To increase her deductions for 2013,she pays December interest of $150 and prepays January and February interest totaling $300.The maturity date of the note is November 30,2014.How much of the interest is deductible in 2013?

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Quizplus · Accepted Answer

Since Janine is a cash-basis taxpayer, she can only deduct interest paid during the tax year. Therefore, the December interest payment of $150 is deductible in 2013, but the prepayments for January and February 2014 cannot be deducted until that tax year. Therefore, the total deductible interest for 2013 is $150.

Janine,a Cash-Basis Taxpayer,borrowed $15,000 for Her Business from a Local