Bob Operates a Clothing Business Using the Accrual Method Over

question 20

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:

Administrative Agency

A government body responsible for overseeing and implementing legislation in specific areas of public policy.

Federal Regulation

Laws or rules prescribed by federal agencies to govern activities and industries across the country.

Procedural Due Process

Procedural due process is a legal doctrine that requires the government to follow fair procedures before depriving a person of life, liberty, or property.

Fair Trial

A legal proceeding conducted according to the rules and principles established in the legal system to ensure an impartial and thorough hearing.