LO9 Kai, a cash basis taxpayer, is a 75% owner and president of Finnigan Fish Market. Finnigan,

Question:

LO9 Kai, a cash basis taxpayer, is a 75% owner and president of Finnigan Fish Market.

Finnigan, an S corporation, uses the accrual method of accounting. On December 28, 2010, Finnigan accrues a bonus of $40,000 to Kai. The bonus is payable on February 1, 2011. When is the bonus deductible? How would your answer change if Finnigan is a cash basis taxpayer?

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