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Sally is an attorney who computes her taxable income using the cash method of accounting. Sage Corporation owned 40% by Sallys brother, 40% by her
Sally is an attorney who computes her taxable income using the cash method of accounting. Sage Corporation owned 40% by Sallys brother, 40% by her cousin, and 20% by her grandmother, uses the accrual method of accounting. Sally is a calendar-year taxpayer, whereas Sage Corporations fiscal year ends on January 31. During 2013, Sally does some consulting work for Sage Corporation for a fee of $10,000. The work is completed on December 15 and Sage receives Sallys invoice on that date. For each of the following assumptions, answer the following questions. During which tax year must Sally report the income? During which tax year must Sage Corporation deduct the expense? a) The payment to Sally is made on December 27, 2013 b) The payment to Sally is made on January 12, 2014 c) The payment to Sally is made in February 3, 2014
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