Tax question...

[Chris]

Ok, I bought a piece of equipment recently. It's something I would take as a deduction wholly in the year of purchase.

I ordered it in December. I was invoiced December 12.

It didn't arrive until sometime in January, and I paid for it (check) a few days later.

Ok, so I have an invoice that says 'december' and a cancelled check that says 'january 2007'.

Do I deduct this for 2006, or wait and deduct it for 2007?

 

[Augusta]

I think you go by when the actual transaction of money exchanged took place. If no money was exchanged until Jan. then you have to claim it for 2007 I think. We made sure that certain donations were made and processed by a Dec. 29th deadline so that they would count for 2006.

 

[Bandguy]

Good question. Don't know the answer, but am looking forward to knowing myself.

 

[Chris]

I think you go by when the actual transaction of money exchanged took place. If no money was exchanged until Jan. then you have to claim it for 2007 I think.

Thanks!

That's what I needed to know.

 

[VictorBravo]

The date when you paid determines the year of deduction-- Unless you are an accrual taxpayer (most people and small businesses are not, you'd probably know it if you were).

"Treas. Reg. § 1.461-1 General rule for taxable year of deduction.
(a) General rule—(1) Taxpayer using cash receipts and disbursements method. Under the cash receipts and disbursements method of accounting, amounts representing allowable deductions shall, as a general rule, be taken into account for the taxable year in which paid. . . ."