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On November 1 of year 0, Jaxon borrowed $44,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of
On November 1 of year 0, Jaxon borrowed $44,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of $3,960 relating to the 12-month period from November of year 0 through October of year 1.
a. How much interest, if any, can Jaxon deduct in year 0 if his business uses the cash method of accounting for tax purposes?
b. How much interest, if any, can Jaxon deduct in year 0 if his business uses the accrual method of accounting for tax purposes?
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