Assignment task:
Scenario 1: Mike, a cash method, calendar year taxpayer, provides legal services to a wide range of clients. On December 20 of Year 1, Mike sent Developer a bill for $50,000 for services Mike rendered in that year with respect to a complex suit filed against Developer. Developer mailed a check for $50,000 to Mike on December 30, Year 1. Mike, however, did not receive the check until January 2 of Year 2.
Scenario 2: Mike, a cash method, calendar year taxpayer, provides legal services to a wide range of clients. On December 20 of Year 1, Mike sent Developer a bill for $50,000 for services Mike rendered in that year with respect to a complex suit filed against Developer. Developer mailed a check for $50,000 to Mike on December 30, Year 1. U.S. postal service delivered Developer's check to Mike's office on December 31, Year 1. Mike's secretary received his mail, including Developer's check. Assume Mike was on a ski vacation at the time of the delivery and did not return to the office until January 15, Year 2. Mike deposited the check immediately upon his return.
Scenario 3: Mike, a cash method, calendar year taxpayer, provides legal services to a wide range of clients. On December 15, Year 1, Developer called Mike and requested that Mike immediately send him a bill for all legal services rendered to date. Mike, who had not intended to send a bill to Developer until December 31, Year 1, agreed to send the bill that day but requested that Developer withhold making payment to Mike until January 2, Year 2. Developer sent Mike the check on January 5, Year 2.
Scenario 4: Mike, a cash method, calendar year taxpayer, provides legal services to a wide range of clients. On December 20 of Year 1, Mike sent Developer a bill for $50,000 for services Mike rendered in that year with respect to a complex suit filed against Developer. Upon receiving the bill, Developer called Mike and explained that he was experiencing some cash flow problems. Developer indicated he could pay the bill on March 1 of Year 2. Mike agreed to the deferral of the payment and requested that Developer send Mike a signed promissory note for $50,000 payable on March 1, Year 2. Mike received the promissory note on December 30 of Year 1. Assume the Developer, consistent with the terms of the promissory note, paid Mike $50,000 on March 1, Year 2.
QUESTION: Assume the legal fees owed to Mike by Developer, a cash method, calendar year taxpayer, are deductible by Developer under Internal Revenue Code section 162. When may Developer claim a deduction in the previous 4 scenarios?