Canary Corporation, an Accrual Method C Corporation, Uses the Calendar

question 121

Essay

Canary Corporation, an accrual method C corporation, uses the calendar year for tax purposes. Leticia, a cash method taxpayer, is both a shareholder of Canary and the corporation's CFO. On December 31, 2019, Canary has accrued a $75,000 bonus to Leticia. Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a. Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to
Leticia on February 4, 2020.
b. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to
Leticia on May 6, 2020.
c. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to
Leticia on April 7, 2020.

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Definitions:

Political

Pertaining to the government or the public affairs of a country, often involving strategy and power dynamics.

Corporate Figures

Individuals or entities that hold significant positions or roles within corporations, often influencing decisions and strategies.

Empires

Large political and economic entities, historically characterized by extensive territories and control over diverse populations and regions.

Sensitive

Easily affected, influenced, or harmed by external forces; requiring delicate handling.