Which of the following items might an IRS agent seek to recharacterize as a constructive dividend?
A)Payment of interest expense to a corporate shareholder,where the loan bears interest at a market rate,has fixed written terms with a repayment required at a defined future point,and the corporation is not thinly capitalized.
B)Payment of salary expense to a corporate shareholder's wife,where the wife performs no services for the corporation.
C)Payment of rental expense to a corporate shareholder,for the use of equipment owned by the shareholder.The equipment is necessary to the corporate business,and the rental cost is similar to that charged by unrelated equipment providers.
D)All of the above payments could reasonably be considered constructive dividends.

Question

Quizplus · Accepted Answer

A payment to a shareholder's wife who performs no services could be seen as a disguised dividend, as it lacks a legitimate business purpose.

Which of the Following Items Might an IRS Agent Seek