Serena,a cash basis taxpayer,owns 60% of the stock of Lark Corporation,a calendar year,accrual basis corporation.On December 31,2008,Lark accrues a salary of $30,000 to Serena,but the payment is not made until 2009.
a.When does Serena report the salary as income, and when does Lark deduct the salary expense?
b.How would your answer change if Serena were a 25% shareholder?

Question

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The Answer of Serena,a cash basis taxpayer,owns 60% of the stock of Lark Corporation,a calendar year,accrual basis corporation.On December 31,2008,Lark accrues a salary of $30,000 to Serena,but the payment is not made until 2009.
a.When does Serena report the salary as income, and when does Lark deduct the salary expense?
b.How would your answer change if Serena were a 25% shareholder?

Serena,a Cash Basis Taxpayer,owns 60% of the Stock of Lark