After having his best three quarters of earnings ever, and with a predicted stro

Question

After having his best three quarters of earnings ever, and with a predicted strong fourth quarter, D, a sole proprietor who is a calendar year, cash basis taxpayer in a manufacturing business, is looking for ways to reduce his A.G.I. this year. Which of the following would probably not generate a deduction for A.G.I.?

            a.         Expenses incurred in December for a big January ad campaign.

            b.         Selling assets below his adjusted basis in them.

            c.         Expenses incurred in providing information to the city council on matters of direct interest to the taxpayer.

            d.         Buying life insurance on his key employees' lives, with the business as beneficiary.

Explanation / Answer

The calender year starts from January and ends on December so what ever transactions occured during this period are only eligible for deduction for AGI. So the expenses incurred in December for ad campaign in January are not eligible for deduction in current year as they can be deductible in next year.

Therefore,the correct option is a.

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