On December 31,2011,Peregrine Corporation,an Accrual Method,calendar Year Taxpayer,accrued a Performance

question 57

Multiple Choice

On December 31,2011,Peregrine Corporation,an accrual method,calendar year taxpayer,accrued a performance bonus of $100,000 to Charles,a cash basis,calendar year taxpayer.Charles is president and sole shareholder of the corporation.When can Peregrine deduct the bonus?

• A) In 2011, if the bonus was authorized by the Board of Directors and payment was made on or before March 15, 20117.
• B) In 2012, if payment was made at any time during that year.
• C) In 2011, if payment was made on or before March 15, 20117.
• D) In 2012, but only if payment was made on or before March 15, 20117.
• E) None of the above.

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash or additional shares.

Cash Settlement

The provision of some futures contracts that requires not delivery of the underlying assets but settlement according to the cash value of the asset.

Stock Index Futures

Financial contracts that obligate the buyer to purchase or the seller to sell a stock index at a predetermined price on a specified future date.

Delivery

The process of transporting goods from a seller to the purchaser's designated location, or the act of fulfilling an obligation or promise.