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.

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Definitions:

Traditional Classifications

The act of organizing or categorizing entities or concepts based on long-established customs or common understandings.

Mental Disorders

Various disorders that influence emotions, cognition, and actions, frequently resulting in suffering or difficulty in everyday activities.

Debilitating

Causing weakness or impairment, often in a severe or significant manner, affecting physical or mental capabilities.

Compulsive Liars

Individuals who have a persistent tendency to tell untruths or fabricate stories, often with no apparent motive or gain.