Luke operates a sole proprietorship using the cash method. This year Jonathan made the following expenditures: a) $480 to U.S. Bank for 12 months of interest accruing on a business loan from September 1 of this year through August 31 of next year even though only $160 of interest accrued this year. b) $600 for 12 months of property insurance beginning on July 1 of this year. What is the maximum amount Luke can deduct this year?
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Since only $160 of interest accrued this year, Luke can deduct $160. b) For the property insurance, Luke can deduct the full amount of $600 since it was paid and incurred within the current year. Show more…
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