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

question 102

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, 2018, 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 4, 2019.
b. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on May 6, 2019.
c. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 12, 2019.

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Definitions:

Factor Analysis

A statistical approach that explains the variability in observed, correlated variables by attributing it to a lesser count of unseen variables, termed factors.

Standardization Sample

A specific group of individuals used to set norms or standards in the development and testing of psychological and educational assessments.

Intellectual Disability

A developmental condition characterized by significant limitations in both intellectual functioning and adaptive behavior, manifesting before the age of 18.

Adaptive Behavior

refers to an individual's ability to modify their actions, decisions, and social skills in response to changing environmental demands and social expectations.