The IRS Agent Who Audited the Form 1120 Filed by Alano

question 21

Multiple Choice

The IRS agent who audited the Form 1120 filed by Alano Inc. concluded that $300,000 of the salary that Alano paid to its CEO and sole shareholder was a constructive dividend. As a result:

• A) The CEO/shareholder's taxable income increases by $300,000.
• B) Alano must distribute an additional $300,000 cash to the CEO/shareholder
• C) Alano must distribute an additional $300,000 cash to the CEO/shareholder.
• D) Alano's taxable income increases by $300,000.

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Definitions:

Type I Error

The error of rejecting a true null hypothesis, also known as a false positive.

Alpha

Often denoted as α, it is a significance level used in hypothesis testing, representing the probability of rejecting a true null hypothesis.

Alpha

A term often associated with the significance level in hypothesis testing, indicating the probability of rejecting a true null hypothesis.

Type II Error

The error occurs when the null hypothesis is not rejected when it is actually false.