Question

How much interest, if any, can jaxon deduct in year 0 if his business uses the cash method of accounting for tax purposes?

Answer 1

Jaxon can deduct in year 0 if his business uses the cash method of accounting for tax purposes $750 under either cash or accrual method of accounting. Jaxon can only deduct two months of interest ([$4,500/12] Ă— 2) because prepaid interest is not deductible under either method of accounting.