Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2016, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.

How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2016 corporate tax return? Explain.

Question

Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2016, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.
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How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2016 corporate tax return? Explain.

Quizplus · Accepted Answer

The Answer of Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2016, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.
​
How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2016 corporate tax return? Explain.

Bev Is the Sole Owner of Bev & Associates, an Accrual