Which of the following best describes the tax planning opportunity related to bonus arrangements for an employee?
a. the fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for a deferral of taxes, but this deferral is limited by the rules under ITA 78(4) which states that a declared bonus is only deductible for the employer if the bonus is paid within 260 days of the employer's year end.
b. the fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for a deferral of taxes, but this deferral is limited by the rules under ITA 78(4) which states that a declared bonus is only deductible for the employer if the bonus is paid within 180 days of the employer's year end.
c. the fact that employment income is reported on the accrual basis and business income is calculated on the cash basis allows for a deferral of taxes, but this deferral is limited by the rules under ITA 78(4).
d. the fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for an unlimited deferral of taxes as a bonus will be deductible for the employer at the time it is declared, but it will not be subject to taxes for the employee until the bonus is received.