Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2019, she leases an office building to use in her business for $120,000 for an 18-month period. To obtain this favorable lease rate, she pays the $120,000 at the inception of the lease. How much rent expense may Maud deduct on her 2019 tax return? Round any calculations to two decimal places and round the final answer to the nearest dollar.

Question

Kathryn Browning

Business

26 December, 20:43

Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2019, she leases an office building to use in her business for $120,000 for an 18-month period. To obtain this favorable lease rate, she pays the $120,000 at the inception of the lease. How much rent expense may Maud deduct on her 2019 tax return? Round any calculations to two decimal places and round the final answer to the nearest dollar.

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Answers (1)

Know the Answer?

Walter Bates · Answer 1

She can deduct the full $120,000. the answer is $120,000.

Explanation:

Therefore, M is following cash basis of accounting, She can deduct the full $120,000 amount. Under cash system, expenses are recorded when cash is paid irrespective of whether it is accrued or not.