On December 31,2011,Flamingo,Inc.,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 1,20117.For Flamingo's 2011 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.

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The bonus is not deductible in 2011 because it was not paid within 2.5 months after the end of the tax year, as required for related parties under the accrual method. Therefore, it is not a subtraction item on Schedule M-1 for 2011.