Bart owns 100% of the stock of Octo Corporation, which uses the accrual method. Bart's sister Samantha, a cash method taxpayer,

Question

2 years ago

15

Bart owns 100% of the stock of Octo Corporation, which uses the accrual method. Bart's sister Samantha, a cash method taxpayer,

did some advertising work for Octo in November 2014. In December, Octo received a billing statement from Samantha for $5,000 and paid Samantha the $5,000 in January 2015. Samantha is a calendar year taxpayer. When may Octo deduct the $5,000?A) 2014B) 2015C) Either 2014 or 2015D) The expense is not deductible since Samantha is Bart's sister.

Business

1 answer:

natima [27] · Answer 1 · 2023-10-28T18:37:29+03:00

natima [27]2 years ago

7 0

Answer:

B) 2015

Explanation:

B) 2015

Octo and Samantha are related parties under the constructive ownership rules of Section 267. Octo may not take a deduction until Samantha recognizes the $5,000 in income.