Laura,the Controlling Shareholder and an Employee of Southwest Corporation,receives an Annual

question 122

Multiple Choice

Laura,the controlling shareholder and an employee of Southwest Corporation,receives an annual salary of $750,000.Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably-sized corporations,the IRS contends that Laura's salary should be no higher than $600,000.The Court upheld the IRS's position.As a result,which of the following is true?

• A)$600,000 is deductible by the corporation; $600,000 is taxable to Laura.
• B)$600,000 is deductible by the corporation; $750,000 is taxable to Laura.
• C)$750,000 is deductible by the corporation; $750,000 is taxable to Laura.
• D)$750,000 is deductible by the corporation; $600,000 is taxable to Laura.

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Definitions:

2004 Amendments

Refers to changes or modifications made to laws or regulations in the year 2004.

Justice Department

A branch of government typically responsible for the enforcement of laws and administration of justice; in the United States, it is a federal executive department.

Federal Trade Commission

A federal agency tasked with enforcing antitrust and consumer protection laws to ensure fair competition and prevent fraudulent business practices.

Horizontal Merger

A business consolidation that occurs between firms who operate in the same industry, often leading to a higher market concentration.