Ivory Fast Delivery Company, an accrual basis taxpayer, frequently has claims for damages to property the company delivered. Often the claim is not filed until a month after the delivery. In the past, approximately 80% of the claims are paid by Ivory. In 2018, claims for $80,000 were filed. The company refused to pay $20,000 of the claims (because they were not valid), and paid $50,000. The remaining $10,000 in claims were processed and paid in January 2019. Also, in January 2019, claims for $8,000 were filed for deliveries made in 2018, and $6,000 was paid on these claims by March 15, 2019. Ivory has not elected to use the recurring item exception to economic performance. Under the all- events and economic performance tests, Ivory can accrue as an expense for 2018:

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Under the all-events test and economic performance rules, Ivory can only accrue expenses that are fixed and determinable. For 2018, only the $50,000 actually paid in 2018 meets these criteria. The $10,000 paid in 2019 and the $6,000 paid for claims filed in 2019 do not meet the economic performance test for 2018.

Ivory Fast Delivery Company, an Accrual Basis Taxpayer, Frequently Has