1. George, a cash basis taxpayer, owns 51% of the stock of Blue Corporation, a calendar year, accrual basis C corporation. On December 25, 2019, Blue Corp accrued a bonus of $50,000 to George – Dr Bonus Expense; Cr Bonus Payable - and paid the bonus to George on January 15, 2020. (this was discussed in class and noted in the power points)

When does George report the bonus – what year?

When does Blue Corporation deduct the bonus?

Would your answers change if George was a 1% shareholder of Blue?

If so, how?

2. Deb – single, 46 years old - is the sole shareholder of Timeless Corporation, a calendar year C corporation. In the current year – 2020 - Timeless earned taxable income of $200,000 and distributed $50,000 to Deb as a dividend. What is Timeless Corp’s federal income tax for 2020? Deb is in the highest tax bracket – 37% - what is her federal income tax if this is her only income for 2020? (both of these – in concept – were covered in class in PPs)

Kyle – single - is the sole shareholder of Swanky Corporation, an S corporation. In the current year -2020- Swanky earned taxable income of $250,000 and distributed $175,000 to Kyle. What is Swanky’s federal income tax for 2020? Kyle – in the highest tax bracket of 37% - what is his federal income tax if this is his only income for 2020 (ignore any potential “Qualified Business Income Deduction” that might be available here)?

Answer rating: 100% (QA)

Case A Facts 1 George is a cash basis taxpayer 2 George owns 51 of the stock of Blue Corporation Controlling shareholder 3 Blue Corporation is a calendar year an accrual basis C corporation 4 Blue Cor... View the full answer