Don, the Sole Shareholder of Pastel Corporation (A C Corporation)

question 41

True/False

Don, the sole shareholder of Pastel Corporation (a C corporation), has the corporation pay him a salary of $600,000 in the current year. The Tax Court has held that $200,000 represents unreasonable compensation. Don must report a salary of $400,000 and a dividend of $200,000 on his individual tax return.

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Definitions:

Sarbanes-Oxley Act

A US federal law that set new or expanded requirements for all U.S. public company boards, management, and public accounting firms, aimed at improving corporate governance and accountability.

Corporate Responsibility

The ethical obligation of companies to act in a manner beneficial to society, including environmental stewardship, fair treatment of employees, and corporate governance.

Interstate Commerce

Refers to the trade, traffic, or transportation of goods, services, or money that crosses state boundaries within the United States.

Intrastate Commerce

Economic activities or transactions that occur entirely within a single state's borders, as opposed to interstate commerce, which involves multiple states.