Part II. Problems (3 problems )

In light of the economic performance rules, how much is deductible by each of the following accrual basis taxpayers, in 2019, and when may any disallowed amounts be deducted in future years?

Genco Corporation sells products with a one-year warranty. In 2019, Genco estimates that warranty costs on products sold during the year will amount to $26,000. In 2019, Genco performs $11,000 of warranty work on products sold during 2018 and $9,500 of warranty work on products sold in 2019. How much of these warranty costs are deductible by Genco on its 2019 calendar tax return?

2. Digicom Corporation, a calendar year taxpayer, leases an office building for $13,600 a month every year for the period October 1 through September 30 of the following year. On September 30, 2019, Digicom prepays the $163,200 rent for the period October 1, 2019 through September 30, 2020. How much rent expense may Digicom deduct in 2019 and 2020?

3. On December 12, 2019, Winthrop Corporation, a calendar year taxpayer, paid an electrician $22,400 to repair the wiring in three of its warehouses. Winthrop expects that all of the repairs will be completed no later than February 6, 2020. When may Winthrop Corporation deduct the payment?