Which of the Following Payments Could Be Treated as a Constructive

question 29

Multiple Choice

Which of the following payments could be treated as a constructive dividend by the IRS?

• A) Interest paid to a shareholder/creditor.
• B) End-of-year bonus payment to a shareholder/employee.
• C) Rent paid to a shareholder/lessor.
• D) All of these payments could be treated as a constructive dividend by the IRS

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Definitions:

Production Costs

Expenses directly associated with the creation of goods or services, including raw materials, direct labor, and manufacturing overhead.

Markup

The amount added to the cost price of goods to cover overhead and profit.

Predetermined Overhead Rate

A rate used to allocate indirect costs to products or services, estimated before the costs are incurred.

Direct Material

Raw materials directly used in the manufacturing of a product, explicitly traceable to the goods being produced.