LO.1 A law practice was incorporated on January 1, 2012, and expects to earn $25,000 per month before deducting the lawyer’s salary. The lawyer owns 100% of the stock. The corporation and the lawyer both use the cash method of accounting. The corporation does not need to retain any of the earnings in the business; thus, the salary of the lawyer

(a calendar year taxpayer) will equal the corporation’s net income before salary expense. If the corporation could choose any tax year and pay the lawyer’s salary at the time that would be most tax efficient (but at least once every 12 months), what tax year should the corporation choose? When should the salary be paid each year?