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2 August, 20:19

Patrick, an attorney, is the sole shareholder of Gander Corporation, a C corporation. Gander is a personal service corporation with a fiscal year ending November 30 (pursuant to a § 444 election). The corporation paid Patrick a salary of $180,000 during its fiscal year ending November 30, 2018. How much salary must Gander pay Patrick during the period December 1 through December 31, 2018, to permit the corporation to continue to use its fiscal year without negative tax effects?

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  1. 2 August, 22:01
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    Therefore, the Salary that Gander Corporation Pay Patrick during the Period without Negative Tax effects is $15,000.

    Explanation:

    Calculation of the Salary that Gander Corporation Pay Patrick during the Period:

    December 1 through December 31 of the Current Year is One Month, They have to Pay 1/12 of the following year tax:

    The salary for the deferral period (December 1 through December 31) must be at least proportionate to the employee's salary received for the fiscal year.

    Gander Corporation must pay the amount to Patrick during the Period December 1 through December 31, to permit the continued use of its fiscal year without negative tax effects is as follows,

    $180,000 * 1/12 = $15,000
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