Pearl, Inc., has accumulated earnings and profits at the end of the year of $275,000.Pearl pays a salary and bonus of $125,000 to Keith, its CEO.Pearl's taxable income before the salary and bonus is $130,000.The IRS classifies $20,000 of the salary and bonus as unreasonable.Calculate Pearl's taxable income after the reclassification.
A) $5,000.
B) $25,000.
C) $110,000.
D) $130,000.
E) None of the above.
Correct Answer:
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