Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for
Question:
Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for Samson, Inc., under a longterm contract. The gross contract price was $2,300,000. Jebali finished construction in 2018 at a cost of $2,100,000. However, Samson insisted that Jebali redo the doorway; otherwise, the contract price would be reduced. The estimated cost of redoing the doorway is $80,000. In 2019, the dispute is settled and Jebali fixed die doorwayal a cost of $65,000.
a. How much must Jebali include in gross income? What amount of deductions is Jebali allowed for 2018?
b. In 2019, how much must Jebali include in gross income? What amount of expenses can Jebali deduct in that year?
Step by Step Answer:
South-Western Federal Taxation 2019 Comprehensive
ISBN: 9781337703017
42th Edition
Authors: David M. Maloney, William A. Raabe, William H. Hoffman, James C. Young