Question

Ajax Computer Company is an accrual method calendar year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $500,000 for advertising time during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deductA. $1 million.B. $500,000.C. $1.5 million.D. $1.5 million only if the professional golf tournament is played before April 15.E. No deduction can be claimed this year.

Answer 1

E. No deduction can be claimed this year.

Step-by-step explanation:

The advertizement will occur next year and Ajax is an accrual method calendar year taxpayer It will recognize deduction when the expense occur regardless of when payment is made.

Currently, this are prepaid advertize, are an asset for the company, these sprot events has the obligation to advertiza Ajax i nthe future, thus is an asset for Ajax and a liability for the sport events.

Once they occur and the advertize is done, Ajax will recognize the expense and therefore, deduction