Ajax Computer Company is an accrual method calendar year taxpayer. Ajax has neve

Question

Ajax Computer Company is an accrual method calendar year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1.4 million for television advertising time during a "super sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $900,000 for advertising time during a professional golf tournament which will occur once in April of next year. What amount of these payments, if any, can Ajax deduct this year? $1.40 millon O No deduction can be claimed this year O $900,000 0 S2.30 million only if the professional golf tournament is played before April 15. O $2.30 million.

Explanation / Answer

Answer is 4th

2.3 million only if the professional golf tournament is played before april 15

because under 31/2 rule payment for service qualifies as economic performance when actual performance is expected within 31/2 month. 500000 might also be deductible if it is qualified a recurring expenses.

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