Jessica,a Cash Basis Individual,is the Sole Shareholder of Crow Corporation,a

question 63

Essay

Jessica,a cash basis individual,is the sole shareholder of Crow Corporation,a regular corporation.On January 1,2010,Jessica loaned Crow $500,000,with the principal due in 10 years and 10% interest due each January 1.Crow,an accrual method,calendar year taxpayer,accrued $50,000 of interest expense on the loan on December 31,2010,and paid the $50,000 to Jessica on January 1,2011.How much is Crow's deduction for interest on this loan for 2010? Would your answer change if Jessica was a 45% shareholder of Crow?

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