Stovall LLC uses the calendar year and the cash method of accounting for tax purposes. It made the following rent payments on December 31, 2003. In each case, determine Stovall's 2003 deduction for the payment:
a. $30,000 for the use of equipment under a six-month lease that began on May 1, 2003.
b. $1,750 rent for warehouse space for the month of January 2004.
c. $48,000 rent for office space for the 24-month period beginning on January 1, 2004.
Under cash basis accounting, things are pretty clear-cut. You recognize revenues when cash is received and expenses as cash is utilized.
A. The cash was paid in 2003, so the deduction is taken in 2003. If the ...
A discussion of when to recognize deductions for cash basis/tax basis accounting.