Which of the Following Items Might an IRS Agent Seek

question 80

Multiple Choice

Which of the following items might an IRS agent seek to recharacterize as a constructive dividend?

• A)Payment of interest expense to a corporate shareholder,where the loan bears interest at a market rate,has fixed written terms with a repayment required at a defined future point,and the corporation is not thinly capitalized.
• B)Payment of salary expense to a corporate shareholder's wife,where the wife performs no services for the corporation.
• C)Payment of rental expense to a corporate shareholder,for the use of equipment owned by the shareholder.The equipment is necessary to the corporate business,and the rental cost is similar to that charged by unrelated equipment providers.
• D)All of the above payments could reasonably be considered constructive dividends.

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Definitions:

Positive Correlation

A relationship between two variables where they move in the same direction, meaning that as one variable increases, so does the other, and vice versa.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, and vice versa.

Psychopathology

The study of mental disorders, including their symptoms, causes, and treatments.

Case Studies

In-depth analyses of a single event, situation, individual, or group to explore causation in order to find underlying principles.