Rental Discrepancy between closely held corporation and shareholder

[kraatz7]

A closely held corporation is required to pay shareholder a fair rental amount each month of $8,500.   An accrual is made each month.   The corporation has experienced some cash flow problems and is 4 months behind on the rents owed to the shareholder.   

1.   How much can the corporation deduct on its return?   $8,500 x 8 = $68,000 or $8,500 x 12 = $102,000

2.  How much should the 1099 MISC Form from the corporation to the Shareholder be made out for? 

3.   How much does the shareholder report on his personal return?

[PatriciaV]

It depends. If the corporation is on an accrual basis of accounting, it may report all rent paid and due as a current year expense. If using a cash basis, only the actual rent paid would be included as an expense.

Form 1099-MISC should report only the rent that was actually paid to the shareholder.

The shareholder would report only the amount that was actually received as income for the current year (most individual taxpayers are on a cash basis, so that income is recorded only when received).