When to recognize deductions in cash basis accounting
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.
...ng system was accrual, the deduction would still have been taken, as the entire lease period occurred in the same year as the payment.
B. The cash was paid December 31, 2003. The deduction should be taken in 2003. ...