Wilma Is CEO of and Owns 100 Percent of WT

question 52

Multiple Choice

Wilma is CEO of and owns 100 percent of WT Enterprises, a cash-basis, calendar-year corporation.The company has always been profitable but over the last five years Wilma's salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends.Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable?

• A)Wilma will pay an additional tax on the $500,000 recharacterized as dividend.
• B)Wilma will be eligible for a refund of Medicare taxes.
• C)WT will lose a deduction for the $500,000 recharacterized as a dividend.
• D)WT will be eligible for a refund of a portion of FICA taxes it paid.

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Definitions:

Sympathetic Nervous System

part of the autonomic nervous system that prepares the body for action, often referred to as the "fight or flight" response system.

Schachter And Singer Theory

A psychological theory suggesting that emotions are determined by physiological arousal and cognitive labeling of the arousal based on environmental cues.

Demand Characteristics

Cues or signals in an experimental setting that might influence participants' behavior or responses, potentially affecting the validity of the experiment.

Experience Of Emotion

involves the complex process of personally undergoing feelings, which is influenced by cognitive evaluations, physiological changes, and social-contextual factors.