Gerald, a cash basis taxpayer, owns 70% of the stock of Black Corporation, a calendar year, accrual basis C corporation. On December 31, 2019, Black accrued a bonus of $80,000 to Gerald, and paid the bonus to Gerald on January 2, 2020. When does Gerald report the bonus, and when does Black Corporation deduct the bonus? Would your answers change if Gerald was a 40% shareholder of Black?

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The Answer of Gerald, a cash basis taxpayer, owns 70% of the stock of Black Corporation, a calendar year, accrual basis C corporation. On December 31, 2019, Black accrued a bonus of $80,000 to Gerald, and paid the bonus to Gerald on January 2, 2020. When does Gerald report the bonus, and when does Black Corporation deduct the bonus? Would your answers change if Gerald was a 40% shareholder of Black?

Gerald, a Cash Basis Taxpayer, Owns 70% of the Stock