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In January of year 0, Justin paid $4,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting.
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11 votes
11 votes
In January of year 0, Justin paid $4,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios

User Qingfei Yuan
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1 Answer

7 votes
7 votes

Answer:

$0

Step-by-step explanation:

Even though the contract period is 12 months or less, Justin must capitalize the cost of the prepayment because the contract period extends beyond the end of next year.

User Leon Van Noord
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