McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 72

{Research} Ultimate Comfort Blankets, Inc. has had a great couple of years and wants to distribute its earnings while avoiding the double tax. It decides to give its sole shareholder, Laura, a salary of $1,500,000 in the current year. What factors would the courts examine to determine if Laura's salary is reasonable [Hint: See Elliotts, Inc. v. Commissioner, 716 F.2d 1241 (9th Cir. 1983)].