Patrick,an attorney,is the sole shareholder of Gander Corporation.Gander is a personal service corporation with a fiscal year ending September 30.The corporation paid Patrick a salary of $294,000 during its fiscal year ending September 30,2010.How much salary must Gander pay Patrick during the period October 1 through December 31,2010,to permit the corporation to continue to use its fiscal year without negative tax effects?
A)$0.
B)$73,500.
C)$220,500.
D)$294,000.
E)None of the above.

Question

Quizplus · Accepted Answer

To avoid negative tax effects, Gander Corporation must pay Patrick a salary that is at least proportionate to the fiscal year. Since the fiscal year is 3 months (October to December), the salary should be 1/4 of the annual salary, which is $294,000/4 = $73,500.

Patrick,an Attorney,is the Sole Shareholder of Gander Corporation