Which of the Following Items Might an IRS Agent Seek

question 73

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 these choices are payments could reasonably be considered constructive dividends.

---

Definitions:

Navajo Culture

The customs, beliefs, arts, and social institutions of the Navajo people, a Native American group primarily living in the Southwestern United States.

Victoria

A state in the southeastern part of Australia known for its capital, Melbourne, and as a hub for culture and sports.

Halifax

The capital of the Canadian province of Nova Scotia, known for its maritime history.

Third Gender

(1) A person who does not identify with the traditional genders of “man” or “woman,” but identifies with a third gender; (2) the gender category available in societies that recognize three or more genders.