On December 31,2017,Flamingo,Inc.,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 2,2018.For Flamingo's 2017 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.

Question

Quizplus · Accepted Answer

The bonus is not deductible in 2017 because it was paid to a related party and not paid within 2.5 months after the year-end. Therefore, it is not a subtraction item on Schedule M-1 for 2017.