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[Q1-3] North Inc. is a calendar-year C corporation, accrual-basis taxpayer. At the end...

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Accounting

[Q1-3]

North Inc. is a calendar-year C corporation, accrual-basis taxpayer. At the end of year 1, North accrued and deducted the following bonuses for certain employees for financial accounting purposes.

  • $9,950 for Lisa Tanaka, a 20 percent shareholder.
  • $12,400 for Jared Zabaski, a 40 percent shareholder.
  • $19,000 for Helen Talanian, a 30 percent shareholder.
  • $9,900 for Steve Nielson, a 0 percent shareholder.

Unless stated otherwise, assume these shareholders are unrelated.

How much of the accrued bonuses can North Inc. deduct in year 1 under the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.)

a. North paid the bonuses to the employees on March 1 of year 2.

b. North paid the bonuses to the employees on April 1 of year 2.

c. North paid the bonuses to employees on March 1 of year 2 and Lisa and Jared are related to each other, so they are treated as owning each others stock in North.

A. Deductible accrued bonuses Year 1 ???
B. Deductible accrued bonuses Year 1 0
C. Deductible accrued bonuses Year 1 ???

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