Delaine is a 90% shareholder in a personal service corporation (PSC). The corporation paid Delaine a...
Delaine is a 90% shareholder in a personal service corporation (PSC). The corporation paid Delaine a salary of $314,100 during its fiscal year ending September 30, 2017.
If required, round your answers to the nearest dollar.
a. Assume that the corporation cannot satisfy the business purpose test for a fiscal year. The corporation can continue to use its fiscal year without any negative tax effects, provided Delaine receives at least $____________ as salary during the period October 1 through December 31, 2017.
b. Assume that the corporation cannot satisfy the business purpose test or salary test for a fiscal year. The corporation pays Delaine a salary of $62,820 for October 1 through December 31, 2017, and salary of $376,920 from January 1, 2018, through September 30, 2018.
The personal service corporation can retain the fiscal year if the corporation’s deduction for salary for its fiscal year ending September 30, 2018, is limited to $______________
Homework Answers
a) Salary During the period Oct. to Dec.
= $314100 * 3/12
= $78525
b) Maximum Deduction Allowed :-
= Salary for Oct to Dec. + Salary * (12-3) / 3
= $62820 + $62820 * 9 / 3
= $62820 + $188460
= $251280
Any Amount paid in excess of $251280 cannot be claimed as a deduction in the current year.
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Delaine is a 90% shareholder in a personal service corporation
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