Rodney,the Sole Shareholder of a Calendar Year,accrual Basis C Corporation,loaned

question 48

Multiple Choice

Rodney,the sole shareholder of a calendar year,accrual basis C corporation,loaned the corporation a substantial amount of money on January 1,2010.The corporation accrued $25,000 of interest expense on the loan on December 31,2010.It pays the interest to Rodney,a cash basis taxpayer,on February 1,2011.Under these facts:

• A)The corporation will be allowed to deduct the interest expense in 2010 and Rodney will be required to report the interest income in 2011.
• B)The corporation will be allowed to deduct the interest expense in 2011 and Rodney will be required to report the interest income in 2010.
• C)The corporation will be allowed to deduct the interest expense in 2011 and Rodney will be required to report the interest income in 2011.
• D)The corporation will be allowed to deduct the interest expense in 2010 and Rodney will be required to report the interest income in 2010.
• E)None of the above.

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