The stock of Sparrow Corporation is owned 20% by Ted, 30% by Ted's father, 30% by Ted's mother, and 20% by Ted's sister. On July 1, 2022, Ted loaned $10,000 to Sparrow Corporation at 3% annual interest, with principal and interest payable on demand. For tax purposes, Sparrow uses the accrual basis and Ted uses the cash basis. Both report on a calendar year basis. Can Sparrow deduct any interest accrued to Ted in 2022? 5-2d. Prepaid expenses - the "12-month rule" When a business prepays business expenses, it may immediately deduct the prepayment if o (1) the contract period does not last more than a year and o (2) the contract period does not extend beyond the end of the taxable year following the tax year in which the taxpayer makes the payment. Example On July 1, 2023, Rick paid $1,200 for a 12-month insurance policy that covers his business property from accidents and casualties from July 1, 2023 through June 30, 2024. How much of the $1,200 expenditure may Rick deduct in 2023 if he uses the cash method of accounting for his business activities