Bob Operates a Clothing Business Using the Accrual Method Over

question 35

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:

Relation

The way in which two or more concepts, objects, or people are connected, or the state of being connected.

Manner

Refers to the way in which an action is performed or how a particular task is executed.

Syntax

The collection of guidelines, norms, and procedures that dictate how sentences are constructed in a specific language, particularly with regards to the arrangement of words and the use of punctuation.

Phonemes

The smallest units of sound that distinguish one word from another in a particular language.