Oday is December 25, 2020 and Tony Fern, the sole shareholder and president of the company, has

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Question:

Oday is December 25, 2020 and Tony Fern, the sole shareholder and president of the company, has requested a meeting with you to discuss various tax issues related to the company’s December 31, 2020 taxation year-end. At the meeting he provided you with the following information.

Tony is considering accruing a $150,000 bonus payable to himself in the December 31, 2020 financial statements for FSL. Ignore leap years.

Required:

Provide Mr. Fern with a detailed summary of the tax consequences to him and FSL of the above transaction for the year ending December 31, 2020, with calculations and specific dates where necessary.

Assume that the prescribed interest rate for the first quarter of 2020 was 2%, for the second quarter it was 1%, for the third quarter it was 2%, and for the fourth quarter it was 3%.