If Lease Rental Payments to a Shareholder-Lessor Are Classified as Unreasonable,the

question 10

True/False

If lease rental payments to a shareholder-lessor are classified as unreasonable,the effect on the corporation is to increase taxable income and the effect on the shareholder is to increase gross income.

---

Definitions:

Indirect Labor

Labor costs of employees who support the production process but are not directly involved in the active production of goods or services.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor costs.

Direct Labor

The compensation and perks given to workers directly engaged in creating goods or delivering services.

Ceramic Tile

A durable, hard flooring material made from shaping and firing clay, often used for floors and walls.