Betty,a sole shareholder,rents property to her corporation.The lease could result in a constructive dividend to Betty.

Question

Quizplus · Accepted Answer

If Betty rents property to her corporation at a below-market rate, the IRS may view the difference between the market rate and the actual rate as a constructive dividend to Betty, which means she is being indirectly paid by the corporation through the property rental agreement. This could result in tax consequences for Betty.

Betty,a Sole Shareholder,rents Property to Her Corporation