Question

On Dec. 15, 2019, Taxpayer hired a roofing company to repair leaks in the roof of Taxpayer's business-use warehouse. The repairs were completed on Dec. 22, 2019. The roofing company invoiced taxpayer for $100,000 on January 3, 2020, and Taxpayer paid the invoice on Feb. 1, 2020. If Taxpayer is an accrual-method taxpayer, how much of $100,000 repair expense can Taxpayer deduct in 2020

Answer 1

Taxpayer

As an accrual-method taxpayer, the amount out of the $100,000 that the taxpayer can deduct in 2020 is:

= $0.

Step-by-step explanation:

a) Data:

Cost of the repair of roof of business-use warehouse = $100,000

Repairs completed on December 22, 2019

Invoice received on January 3, 2020

Invoice paid on February 1, 2020

b) Accrual basis requires that expenses are matched to the period in which they are incurred and not when payment is received. The expense for the roof repairs was incurred in 2019 and should be expensed in 2019 and not 2020.