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 31,2017,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 2, 2018.
b.Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on May 4, 2018.
c.Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 12, 2018.

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 31,2017,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 2, 2018.
b.​Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on May 4, 2018.
c.​Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 12, 2018.

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 31,2017,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 2, 2018.
b.​Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on May 4, 2018.
c.​Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 12, 2018.

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