Question
A)On Dec. 15, 2018, Julie's Tax Prep, a cash-method taxpayer, prepaid $3,000 worth of deductible interest on a business loan. The interest won't accrue until
A)On Dec. 15, 2018, Julie's Tax Prep, a cash-method taxpayer, prepaid $3,000 worth of
deductible interest on a business loan. The interest won't accrue until January 2019.
Julie's Tax Prep will be displaying for the first time at a trade show in July 2019. On Dec.
16, 2018, Julie's prepaid the $6,000 trade show booth rental expense. The payment isn't
due until May 2019, and use of the booth will occur in July 2019.
In addition, On Dec. 28, 2018, Ed's Equipment repaired some equipment in Julie's office
and billed Julie's $5,000. Julie's received the invoice on Dec. 28, 2018 and paid the
$5,000 invoice on Jan. 29, 2019.
How much of the $14,000 in deductible business expenses may Julie's Tax Prep deduct in
2018?
B)In addition to the $14,000 in expenses, in Dec. 2018, Julie's Tax Prep paid two years'
worth of office rent ($2,000/month * 24 months = $48,000). The rent covers Dec. 1, 2018
through Nov. 30, 2020. How much of the $48,000 rent can Julie's deduct in 2018?
B)Instead, Julie's Tax Prep only paid six months' worth of office rent ($2,000/month * 6
months = $12,000) in Dec. 2018. The rent covers Dec. 1, 2018 through May 31, 2019.
How much of the $12,000 rent can Julie's deduct in 2018
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started