10. Distributing automobile A would trigger a taxable gain of $7, 000 pertaining to Crimson, whiledistributing C produces a non-deductible loss of $5, 1000. To preserve the loss on C and avoid spotting a gain on the, Crimson should consider selling C and then distributing cash to the second shareholder. Crimson also needs to distribute vehicle B because there will be zero gain in distribution and no non-deductible loss. 10.
a. The determination in the reasonableness of payment paid to an employee who may be not a shareholder but relates to the sole owner of the corporate-employer should be produced in the same manner as that for earnings paid the shareholder-employee. The degree of relationship between the sole owner of the corporation and the staff should be considered initially to determine in the event that, in essence, the salary could possibly be considered as he was paid for the owner. If perhaps so , precisely the same factors utilized to determine the reasonableness of salary paid out to the owner should be accustomed to determine the reasonableness of salary paid out to the related employee
w. That the employee-shareholder never completed high school should be relevant only with respect to the nature and scope of the employee's work.
c. The fact the employee-shareholder is actually a full-time university student might wellcause any income paid being deemed abnormal
d. If the employee-shareholder was underpaid during the formative amount of thecorporation, this can be evidence of reasonableness of the reimbursement if a portionthereof is for support rendered in prior years.
e. If a corporation has substantial At the & S and will pay only a nominal gross eachyear, a constructive dividend may be found
f. Year-end bonuses would be vulnerable to beneficial dividend treatment, particularly if they can be related to earnings for 12 months, are paid out only to shareholder-employees, and are identified at year-end on an irrelavent basis.
a. Capon reports the $600, 1000 dividend because gross income but claims a...