A shareholder-employee of an S corporation prefers to receive a greater salary rather than a greater pro-rata share of corporate taxable income.

Question

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A shareholder-employee of an S corporation might prefer a greater pro-rata share of corporate taxable income over a greater salary because the distribution is not subject to payroll taxes, whereas salary is subject to payroll taxes.

A Shareholder-Employee of an S Corporation Prefers to Receive a Greater