Ron and Tom are equal owners in Robin Corporation. On July 1, 2011, each lends t

Question

Ron and Tom are equal owners in Robin Corporation. On July 1, 2011, each lends the corporation $30,000 at an annual interest rate of 10%. Ron and Tom are brothers. Both shareholders are on the cash methods of accounting, and Robin Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2012, Robin repays the loans of $60,000 together with the specified interest of $6,000.
a. How much of the interest can Robin Corporation deduct in 2011? In 2012?
b. When is the interest included in Ron and Tom

Explanation / Answer

Ron and Tom are equal owners in Robin Corporation. On July 1, 2011, each lends the corporation $30,000 at an annual interest rate of 10%. Ron and Tom are brothers. Both shareholders are on the cash methods of accounting, and Robin Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2012, Robin repays the loans of $60,000 together with the specified interest of $6,000.
a. How much of the interest can Robin Corporation deduct in 2011? In 2012?
answer =

zero---------in 2011

$ 4000-----in 2012

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