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, 2012, the board of directors authorized a $45,000 year-end bonus for Mr. Carre, which was paid to him on February 1, 2013. In which year can JC Inc. deduct the bonus?

Question

Quizplus · Accepted Answer

According to the tax law, a corporation may deduct a year-end bonus for its employee if it is paid within 2.5 months of the end of the tax year, which in this case is February 1, 2013. Since the bonus was paid in 2013, JC Inc. can deduct the full amount of $45,000 in 2013.

Mr John Carre Owns 67% of the Stock of JC