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Brock Inc
Brock Inc. has a taxation year that ends on September 30. On July 1, 2020 it declared a bonus of $100,000 payable to Stan Gable. The bonus will be paid on February 1, 2020. Describe the tax consequences of this bonus declaration and payment on both Stan Gable and Brock Inc.
Expert Solution
(It is assumed that the payment of bonus date is February 1, 2021 as the bonus cannot be paid before it is declared by the company)
Brock Inc can deduct the bonus paid in the year ending September 30, 2020 as the bonus is declared on July 1, 2020
The bonus will be taxable in the hand of Gable in the year ending September 30, 2021 as it is received on February 1, 2021. But if the bouns is received on February 1, 2020 it is taxable in the year ending September 2020 itself in the hands of Gable.
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