Z is a ten-percent (10%) shareholder of H, Inc. H, Inc. has distributable net in

Question

Z is a ten-percent (10%) shareholder of H, Inc. H, Inc. has distributable net income of $100,000 this year and no accumulated earnings and profits. Z was paid $15,000 by the company for his expertise as a pilot, but he did not fly this year. How is the IRS likely to view the $15,000?

            a.         $15,000 salary to Z.

            b.         $15,000 dividend.

            c.         $10,000 dividend, $5,000 salary, return of capital, or capital gain.

            d.         $7,500 salary, $7,500 dividend.

Explanation / Answer

10000 Dividend 5000 salary

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