D, a cash basis taxpayer, operates a successful travel agency. One of her most s
ID: 2518780 • Letter: D
Question
D, a cash basis taxpayer, operates a successful travel agency. One of her most significant costs is a special computer form on which airline tickets are printed as well as stationary on which itineraries are printed. typically, D buys about a three month supply of these forms for $2,000. knowing that she will be in a lower tax bracket next year. D would like to accelerate her deductions to the current year.
A. Assuming that D pays $12,000 on December 15th for forms that she expects to exhaust before the close of next year, how much can she deduct?
B. Same as above except D purchases the larger volume of forms because D's supplier began offering special discounts for purchases in excess of $3,000.
Explanation / Answer
Answer A) Deduction of $12000 should not eligible for tax deductions. As D purchase it intentionally for next year. Now it will be allowed in next year only, on accrual basis.
B) Since the intention of D is not to purchase for tax deduction but to get the discount. Hence, deduction for such expenses can be allowed in this year also.
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