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

question 66

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, 2014, 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 3, 2015.
b. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 3, 2015.
c. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3, 2015.

---

Definitions:

Understaffed Orphanages

Understaffed orphanages refer to child care institutions that do not have enough staff members to adequately care for the needs of all the children.

Puberty

The developmental period where adolescents undergo physical and hormonal changes to reach sexual maturity.

Culture

A set of shared beliefs, values, customs, behaviors, and artifacts that the members of a society use to cope with their world and with one another.

IQ Tests

Standardized assessments designed to measure human intelligence and cognitive abilities in relation to an age group.