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. $11,500 for Lisa Tanaka, a 20 percent shareholder. $10,700 for Jared Zabaski, a 35 percent shareholder. $17,800 for Helen Talanian, a 30 percent shareholder. $8,900 for Steve Nielson, a 10 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?  North paid the bonuses to the employees on March 1 of year 2.

Croyden is a calendar year, accrual basis corporation. Mr. and Mrs. Croyden (cash basis taxpayers) are the sole corporate shareholders. Mr. Croyden is president of the corporation, and Mrs. Croyden is vice president. Croyden’s financial records, prepared in accordance with GAAP, show the following information for the year: Use Table 7-1 and Table 7-2 Revenues from sales of goods $ 12,900,000 Cost of goods sold (LIFO) (9,260,000) Gross profit $ 3,640,000 Bad debt expense $ 24,000 Administrative salaries and wages 612,000 State and local business taxes 135,000 Interest expense 33,900 Advertising 67,000 Annual property insurance premiums 19,800 Annual life insurance premiums 7,300 Depreciation expense 148,800 Repairs, maintenance, utilities 81,000 Croyden’s records reveal the following facts: Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes. Because of…

Forward Corporation is owned by a group of 15 shareholders. During the current year, Forward pays $550,000 in salary and bonuses to Alvin, its president and controlling shareholder. The corporation's tax rate is 21%, and Alvin's marginal tax rate is 37% for ordinary income and 23.8% (20% + 3.8% on net investment income) for long-term capital gains. The IRS audits Forward's tax return and determines that reasonable compensation for Alvin is $350,000. Forward agrees to the adjustment. Read the requirement. Requirement What effect does the disallowance of part of the salary and bonus deduction have on Forward's and Alvin's respective tax positions? Ignore payroll taxes, such as FICA. Print Done X

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