Refer to the facts in the preceding problem. Assume Mrs. Bard retires in 2023 and receives her first $20,000 payment from Lyton Industries.

a. How much compensation income does Mrs. Bard recognize in 2023?

b. What is Lyton Industries's 2023 tax deduction for the payment to Mrs. Bard?

c. What is the effect of the payment on Lyton Industries's 2023 book income and deferred tax asset or liability?

Assume the taxable year is 2018.

Data from Prob. 27

This year, Mrs. Bard, who is head of Lyton Industries's accounting and tax department, received a compensation package of $360,000. The package consisted of a $300,000 current salary and $60,000 deferred compensation. Lyton will pay the deferred compensation in three annual $20,000 installments beginning with the year in which Mrs. Bard retires. Lyton accrued a $60,000 unfunded liability for the deferred compensation on its current year financial statements.