Big Homes Corporation Is an Accrual Method Calendar Year Taxpayer

question 37

Multiple Choice

Big Homes Corporation is an accrual method calendar year taxpayer that manufactures and sells modular homes. This year for the first time Big Homes was forced to offer a rebate on the purchase of new homes. At year end, Big Homes had paid $12,000 inrebates and was liable for an additional $7,500 in rebates to buyers. What amount of the rebates, if any, can Big Homes deduct this year?

• A) $12,000 because rebates are payment liabilities.
• B) $19,500 if this amount is not material, Big Homes expects to continue the practice of offering rebates in future years, and Big Homes expects to pay the accrued rebates before filing their tax return for this year.
• C) $12,000 because the $7,500 liability is not fixed and determinable.
• D) $19,500 because Big Homes is an accrual method taxpayer.
• E) Big Homes is not entitled to a deduction because rebates are against public policy.

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Definitions:

Personality Traits

Persistent traits that define how a person acts, including qualities like openness, conscientiousness, extraversion, agreeableness, and neuroticism.

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The capacity to perform mental processes such as learning, reasoning, problem-solving, and memory.

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A set of three personality traits: narcissism, Machiavellianism, and psychopathy, which are associated with a manipulative, self-centered, and sometimes malevolent disposition.

Gaining Power

The process of acquiring increased control or influence over others or oneself, often involving social, political, or personal advancement.