Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for
Question:
Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for Samson, Inc., under a longterm contract. The gross contract price was $2,300,000. Jebali finished construction in 2021 at a cost of $2,100,000. However, Samson insisted that Jebali redo the doorway; otherwise, the contract price would be reduced. The estimated cost of redoing the doorway is $80,000. In 2022, the dispute is settled and Jebali fixed the doorway at a cost of $65,000.
a. How much must Jebali include in gross income for these items? What amount of deductions is Jebali allowed for 2021?
b. In 2022, how much must Jebali include in gross income? What amount of expenses can Jebali deduct in that year?
Step by Step Answer:
South-Western Federal Taxation 2022 Individual Income Taxes
ISBN: 9780357519073
45th Edition
Authors: James C. Young, Annette Nellen, William A. Raabe, Mark Persellin, William H. Hoffman