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7 July, 16:20

Saleh, an accountant, is the sole shareholder of Turquoise Corporation, a C corporation. Turquoise is a personal service corporation with a fiscal year ending September 30 (pursuant to a § 444 election). The corporation paid Saleh a salary of $330,000 during its fiscal year ending September 30, 2019. How much salary must Turquoise pay Saleh during the period October 1 through December 31, 2019, if the corporation is to continue to use its fiscal year without negative tax effects?

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  1. 7 July, 17:28
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    Answer: $82,500

    Explanation:

    Saleh's salary for fiscal year ending September 30 = $330,000

    Salary that should be paid between October 1 - December 31, if the corporation is to continue to use it's fiscal year without negative tax effect.

    To avoid negative tax effect, the Saleh's salary should be atleast equal to the amount being given for the fiscal year which ended in September 30.

    October 1 - December 31 = 3 months

    Saleh's monthly salary = total slary during fiscal year : 12

    $330,000 : 12 = $27,500

    October 1 - December 31 = $27500 * 3 = $82,500
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