Paula Is the Sole Shareholder of Violet,Inc

question 18

Multiple Choice

Paula is the sole shareholder of Violet,Inc.For 2014,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2014 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 these is correct.

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Definitions:

National Labor Policy

The overarching framework of laws and regulations that govern labor and employment practices within a country.

Codetermination

A practice in corporate governance that allows workers to participate in management decisions and company board representation.

Enterprise Unionism

A labor union organization model where each union represents workers of a single enterprise rather than workers across multiple enterprises in the same industry.

Seniority

A system in which priority or status is given to individuals within a group based on the length of service or tenure in the organization.