Final answer:
Shanna can deduct $27,000 as rent expense for 2022 under the 12-month rental agreement. If the payment covers 24 months, she can deduct $10,125 for the part of the rent that applies to 2022 (9 months). These amounts are based on the cash basis method of accounting where expenses are recognized when paid.
Step-by-step explanation:
The question pertains to the calculation of rent expense deduction for a taxpayer who uses the cash-based method of accounting. The cash basis method recognizes expenses when they are paid, not when they are incurred. Therefore, the amount of rent expense that Shanna can deduct will depend on the rental agreement term length and the payment date.
Part A
For part A, with the payment covering 12 months (April 1, 2022, to March 31, 2023), the rent expense deduction for 2022 would be the full amount, because she has paid for the entire 12 months within the tax year of 2022. Hence, Shanna's deduction for rent expenses in 2022 would be $27,000.
Part B
Assuming the same payment dates but now covering 24 months (April 1, 2022, to March 31, 2024), Shanna can still fully deduct the payment made in 2022. However, only the portion that relates to the 2022 tax year should technically be considered an expense for that year. The deduction for 2022 would then be the amount for 9 months (April to December 2022). Therefore, Shanna would calculate the monthly rent ($27,000 / 24 months = $1,125 per month) and then multiply this by the 9 months of rent attributable to 2022. This comes to $10,125 as Shanna's deduction for rent expenses in 2022 for part B.