Olive, Inc

question 16

Essay

Olive, Inc., an accrual method taxpayer, is a corporation that is equally owned by Maurice and Alex, who are brothers. The corporation uses the accrual method of accounting and the shareholders use the cash method. To provide Olive with funds to acquire additional working capital, the shareholders each loan Olive $100,000 with a 6% interest rate. At the end of the tax year, there is unpaid accrued interest of $3,000 due to each shareholder. From a timing perspective, when should Olive deduct this $6,000 and when should Maurice and Alex include the $3,000 in gross income? Olive pays the $3,000 to each shareholder early next year.

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Definitions:

Job Characteristics Model

A theoretical framework suggesting that job satisfaction is influenced by five core dimensions: skill variety, task identity, task significance, autonomy, and feedback.

Critical Psychological States

Essential mental conditions believed to affect an individual's motivation and effectiveness in a work setting.

Personal Growth

An individual's process of developing self-awareness, knowledge, skills, and mastering new challenges.

Job Characteristics Model

A framework that proposes that a job's characteristics affect employee motivation, satisfaction, and performance, including skill variety, task identity, task significance, autonomy, and feedback.