MrAnd MrsWilliams Are the Sole Shareholders of Lessing,Inc

question 20

Multiple Choice

Mr.and Mrs.Williams are the sole shareholders of Lessing,Inc.,a regular corporation.Last year,Lessing employed the Williams' son and paid him a $50,000 salary.During a recent IRS audit,the revenue agent discovered that the son rarely shows up for work and spends most of his time playing golf.Which of the following statements is true?

• A)The IRS can treat the $50,000 payment as a constructive dividend to the son.
• B)The IRS can treat the $50,000 payment as a constructive dividend to Mr.and Mrs.Williams.Such treatment has no effect on Lessing Inc.
• C)The IRS can disallow Lessing's $50,000 deduction for the son's salary.Such treatment has no effect on Mr.and Mrs.Lessing.
• D)The IRS can treat the $50,000 payment as a constructive dividend to Mr.and Mrs.Williams and can disallow Lessing's $50,000 deduction for the son's salary.

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Definitions:

Fibrinogen

A soluble plasma protein that is transformed into fibrin during blood clotting, playing a critical role in wound healing.

Clotting

is the process by which blood changes from a liquid to a gel, forming a clot, and is crucial in preventing excessive bleeding when the vascular system is injured.

Plasma Protein

Proteins found in blood plasma, including albumin and globulins, which play roles in clotting, immunity, and transport.

Anemia

A condition in which there is a deficiency of red cells or of hemoglobin in the blood, resulting in pallor and weariness.