B Inc.has an unfunded deferred compensation program for its employees.In the current year, B employees earned $120,000 in deferred compensation, none of which is taxable to any employee.If B Inc.is an accrual basis taxpayer, the corporation may claim a $120,000 tax deduction in the current year because of its deferred compensation liability.

Question

Quizplus · Accepted Answer

B Inc. cannot claim a tax deduction for the deferred compensation in the current year because, under the tax rules for accrual basis taxpayers, a deduction for deferred compensation is not allowed until the year in which it is includible in the employee's gross income.

B IncHas an Unfunded Deferred Compensation Program for Its Employees