Deferred Taxes Deductible?

[BulldogTom]

Maybe this should be under covid 19 forum.

Partnership is accrual based.   They pay an annual tax to the state of CA based on the prior year income and the number of tables the facility is licensed to operate.   The tax is normally due in April.   Because of Covid 19 the state of CA granted an extension of time to pay until November 2020, then extended the time until June of 2021.   Are they going to be deductible on the 1065 return as state taxes?  

For accounting purposes, the matching principle should govern the treatment on the financial statements, but I am unsure if they can be deducted if not required to be paid until the next year.

Thanks

Tom
Modesto, CA

[Lee B]

Over 20 years ago, my client who was an irrigation contractor was audited. One issue that arose was that he hadn't paid some employment taxes for several years.

The auditor proposed an audit adjustment for the unpaid employment taxes saying that they shouldn't be deductible.

Since my client was on accrual basis accounting, I pushed back hard.

After discussing the issue the auditor backed down and removed the adjustment.

[DANRVAN]

11 hours ago, BulldogTom said:

can be deducted if not required to be paid until the next year.

Even if not paid until next year, I believe the all events test of sec 461(h) are met.

Also, since this accrual is not subject to the recurring item exception of reg 1.461-5, the 8 and 1/2 month rule does not apply.