Bob Operates a Clothing Business Using the Accrual Method Over

question 58

Essay

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 31ˢᵗ 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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Definitions:

Electroencephalogram

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Intelligence Quotient (IQ) Test

A standardized test designed to measure a person's cognitive abilities and compare them to the general population.

Mental Status

A composite of an individual's psychological and emotional functioning, often assessed through observation of appearance, behavior, cognitive function, and mood.

Dysarthric Speech

Impaired articulation of speech due to disturbances in muscular control, often resulting from neurological disorders.