Jetex, an accrual basis, calendar year corporation, engages in the business of longdistance freight hauling. Every year, Jetex is required to purchase several hundred permits and licenses from state and local governments in order to legally operate its fleet of trucks. During 2017, the cost of these permits and licenses totaled $1,119,200.
Even though none of the permits and licenses was valid for more than 12 months, a substantial number of them didn't expire until sometime in 2018. In fact, Jetex calculated that $612,000 of the total cost incurred in 2017 actually benefited the company in 2018. For financial statement purposes, Jetex capitalized this amount as an asset and expensed only the $507,200 remainder on its 2017 income statement. As an accrual basis taxpayer, is Jetex limited to a $507,200 deduction in 2017?