Gerald, a Cash Basis Taxpayer, Owns 70% of the Stock

question 66

Essay

Gerald, a cash basis taxpayer, owns 70% of the stock of Black Corporation, a calendar year, accrual basis C corporation. On December 31, 2019, Black accrued a bonus of $80,000 to Gerald, and paid the bonus to Gerald on January 2, 2020. When does Gerald report the bonus, and when does Black Corporation deduct the bonus? Would your answers change if Gerald was a 40% shareholder of Black?

---

Definitions:

Genetically Similar Cells

Cells that have nearly identical genetic material, often as a result of replication in processes such as mitosis.

Homeotic Genes

Genes that control the development of anatomical structures in organisms, ensuring parts develop in the correct locations.

Transcription Factors

Proteins that regulate gene expression by binding to DNA sequences, thereby controlling the transfer of genetic information from DNA to mRNA.

Adult Stem Cells

Cells derived from body tissues that can differentiate into some specific cell types (e.g., blood cells, neuronal cells, or muscle cells), but not all types of cells found in an organism. See pluripotent stem cells and totipotent stem cells.