Timm Inc, a Calendar Year, Accrual Basis Taxpayer, Is Being Sued

question 101

Multiple Choice

Timm Inc., a calendar year, accrual basis taxpayer, is being sued by a customer who was injured when she tripped over a loose carpet in Timm's retail store. Timm's auditors required the corporation to accrue a $500,000 contingent liability and current year expense. Which of the following statements is true?

• A) Timm can deduct the $500,000 accrued expense.
• B) Timm can never deduct the $500,000 expense.
• C) Timm can deduct the expense in the year in which the liability becomes fixed and determinable.
• D) Timm can deduct the expense in the year of payment.

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