Jessica,a Cash Basis Individual,is a 60% Shareholder of Crow Corporation,a

question 82

Essay

Jessica,a cash basis individual,is a 60% shareholder of Crow Corporation,a regular corporation.On January 1,2011,Jessica loaned Crow $300,000,with the principal due in 5 years and 6% interest due each January 1.Crow,an accrual method,calendar year taxpayer,accrued $18,000 of interest expense on the loan on December 31,2011,and paid the $18,000 to Jessica on January 1,20117.How much is Crow's deduction for interest on this loan for 2011? Would your answer change if Jessica was a 25% shareholder of Crow?

---

Definitions:

Development Stage

Refers to a period or phase in an individual's life or in the evolution of a product or concept that represents a state of growth or progress.

Mowrer's Two-factor Theory

A psychological theory that explains learning and behavior as a combination of classical conditioning and operant conditioning.

Burrhus F. Skinner

A prominent American psychologist best known for his work in behaviorism and the development of the theory of operant conditioning.

Operant Conditioning

A learning process in which the strength of a behavior is modified by reinforcement or punishment, a key concept in behavioral psychology.