Multiple Choice
Rodney, the sole shareholder of Orange Corporation, an accrual method, calendar year corporation, loaned the corporation a substantial amount of money on January 1, 2019. Orange Corporation accrued $45,000 of interest expense on the loan on December 31, 2019. Orange pays the interest to Rodney, a cash basis taxpayer, on January 1, 2020. Based on these facts:
A) Orange Corporation will be allowed to deduct the interest expense in 2019 and Rodney will be required to report the interest income in 2020.
B) Orange Corporation will be allowed to deduct the interest expense in 2020 and Rodney will be required to report the interest income in 2019.
C) Orange Corporation will be allowed to deduct the interest expense in 2019 and Rodney will be required to report the interest income in 2019.
D) Orange Corporation will be allowed to deduct the interest expense in 2020 and Rodney will be required to report the interest income in 2020.
E) None of these.
Correct Answer:
Verified
Correct Answer:
Verified
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