Paula Is the Sole Shareholder of Violet,Inc

question 11

Multiple Choice

Paula is the sole shareholder of Violet,Inc.For 2016,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2016 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

• A)Paula's gross income will increase by $100,000 as a result of the IRS adjustment.
• B)Violet's taxable income will not be affected by the IRS adjustment.
• C)Paula's gross income will decrease by $100,000 as a result of the IRS adjustment.
• D)Violet's taxable income will decrease by $100,000 as a result of the IRS adjustment.
• E)None of the above is correct.

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Definitions:

Phenylalanine

an essential amino acid important for the biosynthesis of other proteins and amino acids in the body.

Insulin

A hormone produced by the pancreas that regulates blood sugar levels by facilitating the uptake of glucose into tissues.

Insulin

a hormone produced by the pancreas that regulates the level of glucose in the blood, essential for maintaining healthy blood sugar levels.

Eating Hunger

The physiological need or desire to consume food, triggered by the body's energy requirements.