Ajax Computer Company Is an Accrual Method Calendar Year Taxpayer

question 25

Multiple Choice

Ajax Computer Company is an accrual method calendar year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $500,000 for advertising time during a professional golftournament which will occur once in April of next year. What amount of these payments, if any, can Ajax deduct this year?

• A) $1.5 million.
• B) $500,000.
• C) $1 million.
• D) $1.5 million only if the professional golf tournament is played before April 15.
• E) No deduction can be claimed this year.

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Definitions:

Duty to Warn

a legal obligation to inform others of a risk or hazard that is not immediately apparent, to prevent harm.

Section 402A

A part of the Restatement (Second) of Torts, introducing the concept of strict liability for producing and selling defective products that cause harm to the consumer.

Shrinkwrap Packaging

A method of packaging where a product is covered with a clear, tight-fitting plastic cover, often used for software boxes and other packaged goods.

Limitation of Remedies Clause

A contract provision that restricts the types of remedies available to the parties in case of breach, often to mitigate liability.