Question

North incorporated is a calendar-year c corporation, accrual-basis taxpayer. at the end of year 1, north accrued and deducted the following bonuses for certain employees for financial accounting purposes. $8,850 for lisa tanaka, a 35 percent shareholder. $10,400 for jared zabaski, a 30 percent shareholder. $16,100 for helen talanian, a 15 percent shareholder. $8,300 for steve nielson, a 5 percent shareholder. unless stated otherwise, assume these shareholders are unrelated.

How much of the accrued bonuses can North Incorporated deduct in Year 1 under the given scenarios? If all shareholders are unrelated
A. $35,750
B. $35,850
C. $42,650
D. $43,000

Answer 1

The total amount of accrued bonuses for North Incorporated is $43,650, and if paid within 2.5 months after the end of the tax year, this amount is fully deductible. The correct option would be D. $43,000, accounting for a possible typo in the options presented.

Step-by-step explanation:

The question involves understanding the tax deductibility of accrued bonuses for shareholders of North Incorporated, a C corporation. According to tax regulations, in order for a corporation to deduct accrued bonuses for shareholders, these bonuses must be paid within 2.5 months after the end of the tax year. If these conditions are met and all the shareholders are unrelated, North Incorporated can deduct the entire amount of the accrued bonuses as a business expense.

The sum of the accrued bonuses is $8,850 for Lisa Tanaka, $10,400 for Jared Zabaski, $16,100 for Helen Talanian, and $8,300 for Steve Nielson. These totals amount to $43,650.

Thus, provided the bonuses are paid within the required time frame, the full amount of $43,650 would be deductible, which corresponds to option D. $43,000 (assuming the question includes a slight typo in the total amount, and the intention was to state $43,650).