Under the "One-Year Rule" for the Current Period Deduction of Prepaid

question 55

True/False

Under the "one-year rule" for the current period deduction of prepaid expenses of cash basis taxpayers, the asset must expire or be consumed by the end of the tax year following the year of payment.

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Definitions:

Specific Identification

An accounting method used for inventory costing, where each item in inventory is identified and its cost is individually recorded.

LIFO

"Last In, First Out," a method of inventory valuation where the most recently produced or acquired items are the first to be expensed.

Average Cost

A method of inventory valuation which calculates the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.