QUESTION 10 1.0000 On accrued a performance bonus of $100,000 to Charles, a cash

Question

QUESTION 10 1.0000 On 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? O a In 2017, if the bonus was authorized by the Board of Directors and payment was made on or 31, 2017, Peregrine Co an acc before April 15, 2018. O c In 2017, if payment was made on or before April 15, 2018 O d.In 2018, but only if payment was made on or before April 15. 2018 e None of the above QUESTION 11

Explanation / Answer

b. in 2017 if payment was made at any time during that year because

Charles being a sole shareholder is a related party. Moreover, the deduction bonus of by Peregrine should wait for the inclusion of bonus as gross income in Charles balance sheet. However Charles will include payment of bonus as gross income only after cash receipts. Hence if bonus paid by Peregrine in 2017 then corporation can record deduction for bonus in 2017.

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