Bob Operates a Clothing Business Using the Accrual Method Over

question 39

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 31 ^st 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:

Obesity

A medical condition characterized by an excessive amount of body fat, which can increase the risk of health problems.

Diabetes

A chronic condition characterized by high levels of sugar in the blood, resulting from defects in insulin production, insulin action, or both.

Poor Maternal Nutrition

Insufficient or unbalanced dietary intake during pregnancy, which can adversely affect the health and development of the fetus.

Miscarriage

The unexpected loss of a pregnancy before the fetus can survive outside the womb, typically before 20 weeks of gestation.