Question

On Dec. 15, 2019, Julie’s Tax Prep, a cash-method taxpayer, prepaid $4,000 worth ofdeductible interest on a business loan. The interest won’t accrue until January 2020.Julie’s Tax Prep will be displaying for the first time at a trade show in July 2020. On Dec.16, 2019, Julie’s prepaid the $8,000 trade show booth rental expense. The payment isn’tdue until May 2020, and use of the booth will occur in July 2020.In addition, On Dec. 28, 2019, Ed’s Equipment repaired some equipment in Julie’s officeand billed Julie’s $2,000. Julie’s received the invoice on Dec. 28, 2019 and paid the$2,000 invoice on Jan. 29, 2020.

In addition to the $14,000 in expenses, in Dec. 2019, Julie’s Tax Prep paid two years’

worth of office rent ($1,000/month * 24 months = $24,000). The rent covers Dec. 1, 2019

through Nov. 30, 2021. How much of the $24,000 rent can Julie’s deduct in 2019?

Answer 1

As the question has mentioned that the Julie Tax Prep follows Cash Method Accounting. The only amount paid in the current year will be deducted in 2019 because, In cash accounting, Income is recorded when you receive the money. Expenses are recorded when they are paid.
In the given question, the Rent is an Expense and Julie Prep, and the full amount paid in the year 2019 is to be deducted.
Hence the amount of $24000 is to be deducted in the year 2019.