Mr. John Carre owns 67% of the stock of JC Inc. and is employed as the corporation's CEO. The corporation is a calendar year, accrual basis taxpayer. On December 14, 2020, the board of directors authorized a $45,000 year-end bonus for Mr. Carre, which was paid to him on February 1, 2021. In which year can JC Inc. deduct the bonus?

Question

Quizplus · Accepted Answer

JC Inc. can deduct the bonus in the year it is paid, which is 2021. Since it is paid after the end of the calendar year, it cannot be deducted in 2020. The fact that Mr. Carre owns 67% of the stock and is employed as the CEO does not impact the deductibility of the bonus.

Mr John Carre Owns 67% of the Stock of JC