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Bob Operates a Clothing Business Using the Accrual Method Over

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Bob operates a clothing business using the accrual method over a calendar year. In October of last year, Bob contracted with his father, Tim, for consulting advice. Tim is a cash-basis calendar-year taxpayer, and he billed Bob for $6,000 of consulting fees. This amount was comparable to amounts charged by other consultants (a reasonable amount). Bob paid $2,500 of the consulting fee by December 31 st of last year, but the remaining $3,500 was not paid until January of this year. When can Bob deduct the consulting fee?


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