Taxpayer is a limited liability company (LLC) dedicated to providing architectural engineering and surveying services for construction projects. Taxpayer has adopted the accrual basis ("accrual basis") to determine its gross income and ordinary and necessary expenses. During taxable year 20X1, it carried out the following activities:

1. Taxpayer outsourced three (3) engineers to cover overwork at the end of 20X1. As of December 31, 20X1, Taxpayer owed the subcontracted engineers the amount of $ 45,000, which is recorded as the expense of a professional service for 20X1. On April 3, 20X2, Taxpayer finally paid the engineers the $ 45,000 owed.

2. Taxpayer assumed a loan of $ 100,000 and with the cash received bought New York State bonds. During 20X1, the company received $ 5,000 of interest income. However, during 20X1 the entity paid $ 3,000 of interest on the assumed loan of $ 100,000. The $ 3,000 is recorded on the books as an interest expense.

3. During taxable year 20X1, an employee sued Taxpayer for harassment. Taxpayer, in order not to continue incurring legal expenses and the negative publicity that the lawsuit could generate, decided to settle the lawsuit with his employee, paid him the amount of $ 100,000, but included in the agreement a nondisclosure clause, which prevents third parties from people, entities and government agencies may request a copy of the agreement. The $ 100,000 is included as an expense in the Taxpayer's books for 20X1.

With respect to the events detailed above, determine what amount Taxpayer can claim as an ordinary and necessary expense for the taxable year 20X1.

Select one:

a. $0

b. $48,000

c. $45,000

d. $148,000