The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of the shareholder-employee's gross income but results in an increase in the taxable income of the corporation.

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This is because the portion of a shareholder-employee's salary that is classified as unreasonable is not deductible by the corporation and is instead treated as a deemed dividend to the shareholder-employee, which does not affect their gross income but increases the taxable income of the corporation.

The Portion of a Shareholder-Employee's Salary That Is Classified as Unreasonable