Guzman Corporation Has Its Expenditure of $700,000 for Salary to Its

question 86

Multiple Choice

Guzman Corporation has its expenditure of $700,000 for salary to its president and sole shareholder disallowed as a deduction by the IRS. Comparable salaries for presidents of similarly sized firms in the same industry average $300,000. The IRS reclassified $400,000 as a nondeductible cash dividend. Which of the following form the basis for the IRS disallowance?
I.Lack of Business Purpose.
II.Administrative Convenience Concept.
III.Capital Recovery Concept.
IV.Substance over Form Doctrine.
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• A)Only statement I is correct.
• B)Only statement IV is correct.
• C)Statements I and IV are correct.
• D)Statements I, II, and IV are correct.
• E)Statements I, II, III, and IV are correct.

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Definitions:

Classical Conditioning

A learning process that involves creating associations between a naturally occurring stimulus and a previously neutral stimulus.

Operant Conditioning

Is a learning process through which the strength of a behavior is modified by reinforcement or punishment.

Unconscious Process

Mental activities of which individuals are not aware, influencing behaviors and perceptions without conscious realization.

Particular Consequence

Particular consequence refers to a specific result or outcome that follows an action, decision, or behavior, highlighting the direct impact of certain activities.