For a fiscal year end corporation, can we deduct the PPP related expenses since the loan is not yet forgiven, and then “reverse” it in the future once the loan is forgiven? Or, would we need to treat the related expenses as non deductible in the year incurred with the assumption the loan will be forgiven in the subsequent year?
Without guidance on this as of now, I am planning on recognizing the non deductibility when the lender formally notifies the borrower the amount of forgiveness. To me, this is the triggering event that makes the expenses non deductible. The expenses are deductible until the lender grants forgiveness.
The only thing that makes sense to me is to not deduct the expenses that are included on the forgiveness application. If the taxpayer has a 6/30/20 year end and does not want the PPP to affect their 6/30/20 tax return, then they should not include any pre-7/1/20 expenses on the application.
Take the extreme example where the taxpayer only has PPP qualifying expenses through 6/30/20. In August, they submit their forgiveness application and gain full forgiveness. Where are the expenses that they are not going to deduct? None exist after 6/30/20.