Laura,the controlling shareholder and an employee of Southtown Corporation,receives an annual salary of $750,000.Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably sized corporations,the IRS contends that Laura's salary should be no higher than $600,000.The Court upheld the IRS's position.As a result,which of the following is true?
A)$600,000 is deductible by the corporation; $600,000 is taxable to Laura.
B)$600,000 is deductible by the corporation; $750,000 is taxable to Laura.
C)$750,000 is deductible by the corporation; $750,000 is taxable to Laura.
D)$750,000 is deductible by the corporation; $600,000 is taxable to Laura.

Question

Quizplus · Accepted Answer

The IRS determined that only $600,000 of Laura's salary is reasonable and therefore deductible by the corporation. However, Laura still received $750,000, so she must report the full amount as taxable income.

Laura,the Controlling Shareholder and an Employee of Southtown Corporation,receives an Annual