The IRS Agent Who Audited the Form 1120 Filed by Alano

question 100

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) The CEO/shareholder must repay $300,000 of his salary to Alano.
• 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:

National Income

The total value of all goods and services produced by a country's economy over a specific period, including income from abroad, and serving as a measure of economic health.

Indirect Business Taxes

Indirect business taxes are taxes levied on goods and services rather than on income or profits, such as sales tax or value-added tax.

Investment

The allocation of resources, usually financial, into assets with the expectation of generating future profit or income.

Per Capita GDP

The gross domestic product of a country divided by its population, indicating the average economic output per person.