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svet-max [94.6K]
3 years ago
8

Vernon is a cash basis taxpayer with a calendar tax year. on october 1, 2016, vernon entered into a lease to rent a building for

use in his business at $3,000 a month. on that day vernon paid 18 months rent on the building, a total of $54,000 ($3,000 × 18 months). how much may vernon deduct for rent expense on his 2016 tax return?
Business
1 answer:
tester [92]3 years ago
8 0

Answer:

$9,000

Explanation:

Vernon can only deduct the actual lease expenses incurred during 2016, and that is only three months: October, November and December.

= 3 months x $3,000 per month = $9,000

This logic applies to every expense that is paid in advance, you can only deduct payments that apply for the current tax year.

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