Question

Big Homes Corporation is an accrual method calendar year taxpayer that manufactures and sells modular homes....

Big Homes Corporation is an accrual method calendar year taxpayer that manufactures and sells modular homes. This year for the first time Big Homes was forced to offer a rebate on the purchase of new homes. At year end, Big Homes had paid $13,200 in rebates and was liable for an additional $8,100 in rebates to buyers. What amount of the rebates, if any, can Big Homes deduct this year?

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Answer #1

Rebate is portion of selling price which is returned by seller to buyer.It is returned by seller after receiving full amount.Accrual method means method in which expenses and revenue is matched Expenses and Revenue are recorded in books when they due not when expenses incurred and revenue received.

Big homes corporation follows accural method for tax purpose so it can deduct rebate to which he has paid and which he is liable to paid .Big homes can deduct full amount this year(13200+8100)=$21300

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