During the year, GiantPanda, Inc. paid the Environmental Protection Agency $500,000 related to the cleanup 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 were $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.Compose a memo to the files explaining the proper tax treatment of the payment including in which tax year the deduction can be taken.