a$.$ When are expenses deductible by a cash method taxpayer?

A$.$ A cash$-$method taxpayer deducts expenses when they are paid. A cash$-$method taxpayer is$,$ however, required to capitalize fixed assets and recover the cost through depreciation or amortization. Section $179$ does, however, permit many taxpayers to currently deduct up to $$1,160,000$ of equipment. Prepaid expenses must also be capitalized and deducted over the term of the prepayment if that term extends substantially beyond the end of the tax year. Typically, capitalization is required only if the term of the prepayment extends beyond the close of the tax year following the year of payment.

B$.$ A cash$-$method taxpayer deducts expenses when they are paid. A cash$-$method taxpayer is$,$ however, required to capitalize only fixed assets and recover the cost through depreciation or amortization.

C$.$ A cash$-$method taxpayer deducts all expenses when they are paid. There are no exceptions to this.

D$.$ A cash$-$method taxpayer deducts expenses when they are paid. A cash$-$method taxpayer is$,$ however, required to capitalize prepaid expenses and deduct the cost over the term of the prepayment if that term extends substantially beyond the end of the tax year. A cash$-$method taxpayer is not required to capitalize fixed assets and recover the cost through depreciation or amortization.