Strong Corporation Is Owned by a Group of 20 Shareholders

question 26

Essay

Strong Corporation is owned by a group of 20 shareholders. During the current year, Strong Corporation pays $225,000 in salary and bonuses to Stedman, its president and controlling shareholder. The IRS audits Strong's tax return and determines that reasonable compensation for Stedman would be $125,000. Strong Corporation agrees to the adjustment.
a)What effect does the disallowance of part of the deduction for Stedman's salary and bonuses have on Strong Corporation and Stedman?
b)What tax savings could have been obtained by Strong Corporation and Stedman if an agreement had been in effect that required Stedman to repay Strong Corporation any amounts determined by the IRS to be unreasonable?

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Definitions:

Gender Identity

Awareness of one's gender.

Societal Norm

The accepted behavior that an individual in a society is expected to conform to.

Age Identities

Refers to how individuals perceive their own age and how they align or contrast with societal expectations related to age groups.

Cognitive Competencies

Refers to mental skills and abilities, such as problem-solving, memory, and attention, which are necessary for successful learning and functioning.