Background
Accrual method taxpayers report income when earned and claim deductions when expenses are owed.
Accrual method taxpayers may claim deductions in the taxable year in which
- all the events have occurred that establish the liability,
- the amount of the liability can be determined with reasonable accuracy, and
- economic performance has occurred with respect to the liability. Gold Coast Hotel is an example of a court applying the “all events” and “reasonable accuracy” prongs to determine whether a contingent liability is a deductible business expense.
For a general comparison of accrual method to the cash method, the other major process used to determine when a taxpayer has income, see Cash Method v. Accrual Method.
Read more about this topic: Gold Coast Hotel & Casino V. United States
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