Homer Currently Operates a Successful S Corporation

question 44

Multiple Choice

Homer currently operates a successful S corporation. He would like to bring his two teenage children into the business. If he gives each child 10% of the stock, which of the following statements is true?

• A) Since the children did not pay for the stock, Homer will still be taxed on the full income of the corporation under the assignment of income doctrine.
• B) Homer must receive a reasonable salary for any time he spends working on behalf of the business.
• C) Both statements are true.
• D) Neither statement is true.

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