Little Corporation Uses the Accrual Method of Accounting

question 97

Essay

Little Corporation uses the accrual method of accounting. Little's sole shareholder, Renee, uses the cash method of accounting. Both taxpayers use the calendar year as their tax year. The corporation accrues a $25,000 interest payment to Renee on December 25, 2011 and makes the payment on March 10, 2012. What are the tax consequences of the transactions to both taxpayers in 2011 and 2012?

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Definitions:

Relationships

Bonds or connections between individuals, which can be based on factors like affection, kinship, common interests, or social commitments.

Forgiveness

The conscious, deliberate decision to release feelings of resentment or vengeance toward a person or group who has harmed you.

Offenses

Acts that violate legal rules or social norms, ranging from minor infractions to serious crimes.

Mischievously

In a manner that is playfully naughty or troublesome, often causing minor harm or irritation.