Canary Corporation,an accrual method C corporation,uses the calendar year for tax purposes.Leticia,a cash method taxpayer,is both a shareholder of Canary and the corporation's CFO.On December 31,2015,Canary has accrued a $75,000 bonus to Leticia.Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a.
Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.
b.
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 4,2016.
c.
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.

Question

Canary Corporation,an accrual method C corporation,uses the calendar year for tax purposes.Leticia,a cash method taxpayer,is both a shareholder of Canary and the corporation's CFO.On December 31,2015,Canary has accrued a $75,000 bonus to Leticia.Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a.​
Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.
b.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 4,2016.
c.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.

Quizplus · Accepted Answer

The Answer of Canary Corporation,an accrual method C corporation,uses the calendar year for tax purposes.Leticia,a cash method taxpayer,is both a shareholder of Canary and the corporation's CFO.On December 31,2015,Canary has accrued a $75,000 bonus to Leticia.Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a.​
Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.
b.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 4,2016.
c.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.

Canary Corporation,an Accrual Method C Corporation,uses the Calendar Year for Tax