Purple Corporation, a personal service corporation (PSC), adopted a fiscal year ending September 30. The sole shareholder of the corporation is a calendar year taxpayer. During the fiscal year ending September 30, 2019, the shareholder-employee received $120,000 salary. The corporation paid the shareholder-employee a salary of $15,000 during the period beginning October 1, 2019 through December 31, 2019.
A. The corporation salary expense for the fiscal year ending September 30, 2020 is limited to $120,000.
B. The corporation salary expense for the fiscal year ending September 30, 2020 is limited to $135,000.
C. The corporation salary expense for the fiscal year ending September 30, 2020 is limited to $60,000.
D. The corporation must switch to a calendar year.
E. None of these.
Answer: C
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