Laura, the Controlling Shareholder and an Employee of Southtown Corporation

question 2111

Multiple Choice

Laura, the controlling shareholder and an employee of Southtown Corporation, receives an annual salary of $750,000. Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably sized corporations, the IRS contends that Laura's salary should be no higher than $600,000. The Court upheld the IRS's position. As a result, which of the following is true?

• A) $750,000 is deductible by the corporation; $600,000 is taxable to Laura.
• B) $750,000 is deductible by the corporation; $750,000 is taxable to Laura.
• C) $600,000 is deductible by the corporation; $750,000 is taxable to Laura.
• D) $600,000 is deductible by the corporation; $600,000 is taxable to Laura.

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Definitions:

Antipsychotic Drugs

Drugs used to control severe psychotic symptoms, such as delusions, hallucinations, disorganized speech, and disorganized behavior, by inhibiting dopamine activity; also known as neuroleptics.

Neuroleptics

A class of medication primarily used to manage psychosis, notably in schizophrenia and bipolar disorder, also known as antipsychotics.

Tardive Dyskinesia

A neurological disorder characterized by involuntary, repetitive body movements, often a side effect of long-term use of antipsychotic drugs.

Tardive Dyskinesia

A neurological disorder characterized by involuntary, repetitive body movements, often resulting from long-term use of antipsychotic medication.