Question

Company N, an accrual basis taxpayer, owes $90,000 to Creditor K. At the end of 2015, Company N accrued $7,740 interest payable on this debt. It didn’t pay this liability until March 3, 2016. Both Company N and Creditor K are calendar year taxpayers. For each of the following cases, determine the year in which Company N can deduct the $7,740 interest expense:
a. Creditor K is a cash basis taxpayer, and Company N and Creditor K are related parties.
b. Creditor K is an accrual basis taxpayer, and Company N and Creditor K are related parties.
c. Creditor K is a cash basis taxpayer, and Company N and Creditor K are unrelated parties.


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  • CreatedNovember 03, 2015
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