Any form of compensation that is deductible by the corporation in a fiscal year prior to the year it is included in the income of the shareholder involves tax deferral.

Question

Quizplus · Accepted Answer

The statement is true. When a corporation pays compensation to an employee or shareholder, it can deduct the expense in the year it was paid. However, the recipient of the compensation will include it in their income in the year they receive it, which could be a later fiscal year. This defers the tax liability for both the corporation and the recipient.

Any Form of Compensation That Is Deductible by the Corporation