Question

In January of year 0, Justin paid $4,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios

Answer 1

$0

Step-by-step explanation:

Even though the contract period is 12 months or less, Justin must capitalize the cost of the prepayment because the contract period extends beyond the end of next year.