- quote -

Still, even if it's not paid until next year, (2005?) then
that's when it will be a tax deduction. If the corporate
books have already accrued it in previous years, there will
be an appropriate adjustment on the M-1.

ChEAr$,
Harlan Lunsford, GC and EA n LA

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- quote -

The plan is to pay the salary next year when the funds are
available. My fear is that the salary will seem excessive as
compared to previous years and the IRS may want to treat it
as a dividend. This is why I think it should be recorded on
the books and on the 1120, M-1. What do you think?

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John Fairplay wrote:

- quote -

Well now.... if the funds aren't available to actually PAY
the salary, and accrual method be damned, why even accrue
it? Or record it? Or is the plan to eventually pay it?
Or was the payment of it contingent on having a profit on
that spec house?

See what I mean? Just don't record it if it can't be paid.

ChEAr$,
Harlan Lunsford, GC and EA n LA

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My company builds spec homes and recently had to sell one at
a loss. The gross sale was $400,000 and the COGS were
$415,630 (not including any administrative salary). Since
the administrative salary was an indirect cost of
constructing the home, can the salary that should have been
paid be entered on the COGS even though the funds weren't
available to actually pay the salary? If not, how should
this cost be treated when it can be payed? and how is it
entered on form 1120, part of COGS or as a salary deduction?

Thanks for your help!

PS The accrual method of accounting is used.

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