Question

Lupe, a cash basis taxpayer, owns 55% of the stock of Jasper Corporation, a calendar year accrual basis C corporation. On December 31, 2019, Jasper accrues a performance bonus of $100,000 to Lupe that it pays to him on January 15, 2020.In which year can Jasper deduct the bonus? In which year must Lupe include the bonus in gross income?

Answer 1

Explained below.

Step-by-step explanation:

An organization that utilizes an accrual system can't challenge a reduction in the investment of a relevant group. For example, a more than 50% shareholder, continuously the recipient notifies that value as profit. Lupe a cash base taxpayer that needs to report the $100,000 reward in the year 2016 that year in which he accepts the payment. The Jasper Corporation may subtract the $100,000 bonus in the year 2016 the concerned year Lupe is needed to report it as similar to income.