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:

Assurances

Promises or declarations intended to give confidence or certainty about certain outcomes or behaviors.

Consequential Damages

Additional losses or damages that result indirectly from a breach of contract, not caused directly by the breach itself.

Sales Contract

A formal agreement between a buyer and seller detailing the terms and conditions of a sale of goods or services.

Commercial Loss

Financial damage suffered by a business, often through reduced sales, increased costs, or direct loss of assets.