Under the 12-Month Rule for the Current-Period Deduction of Prepaid

question 95

True/False

Under the 12-month rule for the current-period deduction of prepaid expenses of cash basis taxpayers, the asset must expire or be consumed by the end of the tax year following the year of payment.

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Definitions:

Variable Overhead Item

Costs that vary with the level of production output, such as utilities or materials, and are not fixed over the short term.

Rate Variances

The difference between the actual rate paid for inputs and the standard rate expected, often analyzed for labor or overhead rates.

Efficiency Variances

The difference between the actual amount of an input used and the expected (or standard) amount needed, multiplied by the standard cost per unit of input.

Landing Gears

A critical aircraft component that supports the plane during landing and takeoff.