On November 15, 2018, X Corp., an accrual basis taxpayer, enters into a contract which will provide the corporation with the use

Question

3 years ago

12

On November 15, 2018, X Corp., an accrual basis taxpayer, enters into a contract which will provide the corporation with the use

of manufacturing equipment for the 5 year period beginning on December 1, 2018. X Corp. paid $100,000 for the 5-year period on December 1, 2018. How much, if any of the payment can X Corp. deduct in 2018

Business

1 answer:

Lady bird [3.3K] · Answer 1 · 2022-05-29T10:26:39+03:00

Answer: $20000

Explanation:

Since $100,000 is paid for the contract which will provide the use of manufacturing equipment for 5 years, the payment that can be deducted for each of the 5 years will be an equal payment.

Therefore, the payment that X Corp. can deduct in 2018 will be:

= $100,000 / 5

= $20000