1. Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment in 20x6? (Please note: payments for assets to be consumed in the following year are fully deductible in the year of payment if the expenditure results in a benefit with a duration of 12 months or less and is consumed by the end of the following year.) a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing B's internal control system. b) $500,000 to purchase a new piece of commercial real estate. The equipment was delivered on January 8, 20x7 and has a useful life of 40 years. c) $16,900 property tax to the local government for the first six months of 20x7. d) $50,000 for a two-year lease beginning on February 1, 20x7.
1. Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment in 20x6? (Please note: payments for assets to be consumed in the following year are fully deductible in the year of payment if the expenditure results in a benefit with a duration of 12 months or less and is consumed by the end of the following year.) a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing B's internal control system. b) $500,000 to purchase a new piece of commercial real estate. The equipment was delivered on January 8, 20x7 and has a useful life of 40 years. c) $16,900 property tax to the local government for the first six months of 20x7. d) $50,000 for a two-year lease beginning on February 1, 20x7.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:1. Firm B uses the calendar taxable year and the cash method of accounting. On December
31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment
in 20x6? (Please note: payments for assets to be consumed in the following year are fully
deductible in the
12 months or less and is consumed by the end of the following year.)
year
of payment if the expenditure results in a benefit with a duration of
a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing
B's internal control system.
b) $500,000 to purchase a new piece of commercial real estate. The equipment was
delivered on January 8, 20x7 and has a useful life of 40 years.
c) $16,900 property tax to the local government for the first six months of 20x7.
d) $50,000 for a two-year lease beginning on February 1, 20x7.
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