Which of the following transactions does not have the potential of creating a constructive dividend?
A)compensation paid by a corporation to a shareholder-employee
B)purchase of corporate property by the shareholder
C)shareholder's rental of corporate property
D)All of the above can result in a constructive dividend.

Question

Quizplus · Accepted Answer

All of the options listed can potentially result in a constructive dividend. This occurs when a corporation provides a benefit to a shareholder that can be considered equivalent to a dividend, even if it's not explicitly labeled as such. Compensation to a shareholder-employee, purchase of corporate property by a shareholder, and a shareholder's rental of corporate property can all be scrutinized for being more favorable than what would be expected in an arm's length transaction, thus potentially being classified as constructive dividends.

Which of the Following Transactions Does Not Have the Potential