DRT Company is a manufacturer of gasoline-powered go-karts and other power products. DRT is a calendar-year, accrual-basis taxpayer. DRT generally files their tax return by the extended due date (912 months following the close of the tax year). In late December, representatives of DRT ask for your assistance in determining the appropriate deduction for the current year for 10 different items described in the chart below. DRT is willing to elect the recurring item exception for any item listed, and all amounts are assumed to be material. In addition, DRT also has two specific questions regarding the reporting of intangibles related to (1) the acquisition of a business during the year and (2) the disposition of two intangibles from an acquisition six years ago. Information for these two questions is provided the last two sections of the chart shown below, and may require some research.

32. In relaying the information on the rental agreement in (1) above, a Vice President at DRT asks if the result would be different if DRT used the cash method of accounting. DRT is considering the acquisition of a services provider that uses the cash method, and they are curious as to how certain items would be handled under a system. Answer for the cash method, based on the facts in (1). (Proposed deduction by DRT: $53,000)