In short
An accrual-method taxpayer deducts an expense when all events have occurred that fix the liability, the amount can be determined with reasonable accuracy, and economic performance has occurred.
Key takeaways
- Under the recurring item exception, some expenses can be deducted in the year incurred if paid within 8½ months after year-end.
- Income is generally reported when the right to it is fixed and the amount determinable, or earlier if received.
- Estimated reserves, such as for bad debts or warranties, aren't deductible until paid or written off.
Where it's tested
REG: Individual Taxation: Gross Income — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which of the following items is included in a taxpayer's federal gross income?