Question
During the year, GiantPanda, Inc. paid the Environmental Protection Agency $500,000 related to the clean-up of leaking underground storage tanks. The EPA fixed the tanks
During the year, GiantPanda, Inc. paid the Environmental Protection Agency $500,000 related to the clean-up of leaking underground storage tanks. The EPA fixed the tanks and cleaned up the leak. Following the clean-up, the EPA initially assessed a $2,000,000 fine against the company representing the $25,000 per day penalty for noncompliance for the 80 days the company was not in compliance. GiantPanda ultimately settled the assessment for $500,000. During the settlement discussions, the EPA disclosed that actual clean-up costs incurred was $300,000. List and describe the basic records that GiantPanda should keep to justify the amount and the tax year of the deduction for the environmental cleanup. Write a memo to the files explaining the proper tax treatment of the payment including in which tax year the deduction can be taken.
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