Question

Big home corporation is an accrual method calendar year taxpayer that manufacturers and sell modular home. This year for the first time big home was forced to force to offer a rebate on the purchase of new home. At the end big home had paid 13600 in rebate and was liable for an additional 8300 in rebate to buyers.
What amount of the rebate if any can big home deduct this year.

Jones operates an upscale restaurant and he pays experience Cook 39500 per year. This year he hired his son as an apprentice cook. Jones agreed to pay his son 43600 per year.
What is true about this statement.

Manley operate a law practice on the accrual method and calendar year. At the beginning of the year Manley firm had an allowance for doubtful accounts with a balance of 14100. At the end of the year, Manley recorded bad debt expenses of 21400 and the balance of doubtful accounts had increased to 19600.
What is Manley deduction for bad debt expenses this year.

Answer 1

1) $21,900 when this amount is not material, and Big Homes expects to pay the accrued rebates before filing this year's tax return and also wants to continue the offering rebates practices in future years.

2) Solution: Jones is allowed to deduct only reasonable compensation and it can be deducted in the period in which Jones actually pays his son. The amount of reasonable compensation will be lesser than $39,500

3) Solution: $15,900

Working: Manley deduction for bad debt expenses: 14,100 + 21,400 - 19,600 15,900