Before Paying Salaries to Its Two Shareholders,Steamboat Corporation Has Net

question 10

Essay

Before paying salaries to its two shareholders,Steamboat Corporation has net income of $640,000 during the year ($1,200,000 revenue - $560,000 operating expenses).Dean and Mary are equal shareholders of Steamboat and work in similar jobs as employees of the corporation.Steamboat pays each shareholder-employee a salary of $320,000,which results in zero taxable income for the corporation.On audit,an IRS agent determines that $40,000 of the amount paid to each of the shareholders is unreasonable compensation.The shareholders' tax adviser has told them that the IRS agent is probably correct in his determination.What effect will the IRS agent's finding have on the taxable income of Dean,Mary,and Steamboat Corporation?

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Definitions:

Secure Base

A psychological concept wherein an individual uses a trusted person as a foundation from which to explore and as a refuge in times of stress.

Caregiver

An individual who provides care and assistance to someone else who is in need, such as a child, elderly person, or someone with disabilities or chronic illness.

Dark Triad Characteristics

A constellation of three personality traits: narcissism (excessive self-focus and self-importance), Machiavellianism (manipulativeness and deceit), and psychopathy (lack of empathy and remorse).

Sexual Relationships

Interpersonal relationships that involve physical and emotional intimacy, and sexual activity between two or more individuals.