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Paula Is the Sole Shareholder of Violet, Inc

question 82

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Paula is the sole shareholder of Violet, Inc.For 2012, she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2012 is $500,000.On audit, the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?


Definitions:

Cheating

Dishonest behavior or attempting to gain an unfair advantage in a competitive situation.

Marginal Cost

The advancement in overall fees incurred by producing an extra unit of a good or service.

Market Demand Curve

A graphical representation that shows the quantity of goods that consumers in a market are willing to buy at different prices.

Herfindahl-Hirschman Index (HHI)

A measure of market concentration that is calculated by squaring the market share of each firm competing in a market and then summing the squares.

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