A Corporation is required to pay the shareholder that owns 69% of the corporation a fair rate of $8,500 per month for rental of a business building.   The corporation has experienced some cash flow problems and the shareholder has not been paid for 4 months.  The corporation continues to accrue the $8,500/month as an expense on its profit and loss statement.

1.  How much should the corporation include on its 1099 Misc Form?  $8,500 x 8 months = $68,000 or $8,500 x 12 months = $102,000?

2.  How much rental expense will the accrual based corporation deduct on its for 1120?  

3.  How much will the cash basis taxpayer deduct on his 1040?

4.  If there is a difference does anyone have suggestions on how to reconcile it?