An exception to the economic performance test allows the deduction of year-end accruals if
I.The liability exists and the amount of the liability can be reasonably estimated.
II.Economic performance occurs within the shorter of 8 1/2 months after the close of the tax year or a reasonable time after the close of the tax year

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

An exception to the economic performance test allows the deduction of year-end accruals if
I.The liability exists and the amount of the liability can be reasonably estimated.
II.Economic performance occurs within the shorter of 8 1/2 months after the close of the tax year or a reasonable time after the close of the tax year
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Both statements are correct. The exception to the economic performance test allows taxpayers to deduct year-end accruals if the liability exists and the amount can be reasonably estimated, and economic performance occurs within the shorter of 8 1/2 months after the close of the tax year or a reasonable time after the close of the tax year. Therefore, both statements I and II are correct.

An Exception to the Economic Performance Test Allows the Deduction