Ajax Computer Company is an accrual-method calendar-year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1.8 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $1,300,000 for a one-time advertising blitz during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deduct this year? a. $1.80 million. b. $3.10 million only if the professional golf tournament is played before April 15. c. $1,300,000. d. No deduction can be claimed this year. e. $3.10 million.

Question

Business

Denisse Cortez

24 April, 16:22

Ajax Computer Company is an accrual-method calendar-year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1.8 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $1,300,000 for a one-time advertising blitz during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deduct this year? a. $1.80 million. b. $3.10 million only if the professional golf tournament is played before April 15. c. $1,300,000. d. No deduction can be claimed this year. e. $3.10 million.

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Answers (1)

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Aliya Reese · Answer 1

a. $1.80 million

Explanation:

This is due to the fact that under the 3½ month rule payment qualifies as economic performance provided the services are to be rendered within 3.5 months.

Therefore, Ajax can deduct $1.80 million