Final answer:
Rebecca can deduct the $2,000 for accounting services in the year the services were provided by the accountant, even though the payment was made in advance.
Step-by-step explanation:
If Rebecca paid $2,000 for accounting services in advance and expected the services to be completed within 3 ½ months, but the services were provided a month later, the deduction depends on when the services were completed. In this case, the services were completed one month later, so the deduction can be made in Year 1.
For tax purposes, business expenses are generally deductible in the year in which the service is actually provided. In the scenario provided, Rebecca paid for accounting services in advance, anticipating that the services would be completed within 3 ½ months. If the accountant performed the services a month later than this expected period, the deduction for the $2,000 would typically be taken in the year that the service was actually completed, not the year of payment.
This is in line with the tax accounting principle of matching expenses with the income they help generate. Therefore, if Rebecca expected to receive the services in Year 0 but actually received them in Year 1, she would deduct the expense in Year 1. This is because tax deductions are typically aligned with the delivery of service or the consumption of the benefit, rather than the pre-payment or the expected timeline.