Prepaid Car Lease

[Brian EA]

Tax payer would like to pre pay lease payments on his car for 6 months in 2009.
His S Corp Accounting method is on a cash basis.
The question is; Can he claim the full deduction in 2008 or he has to pro rate it as in the case of prepaid insurance.

Thanks
brian

[Roland Slugg]

Rent paid in advance by a cash basis T/P may be deducted only in the tax year for which it applies.

Your reference to insurance premiums is not correct. Insurance premiums covering one year or less may be deducted by a cash basis taxpayer, in their entirety, in the year paid if a portion of the coverage applies to the year paid. Premiums for multiple years must be apportioned (although one court even permitted a full deduction where the practice had been consistently followed and had not been challenged by the IRS).