Question

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of a shareholder-employee's gross income, but results in an increase in the taxable income of the corporation.

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Answer 1

The portion of a shareholder-employee's salary that is classified as unreasonable does not affect their gross income, but it does increase the taxable income of the corporation.

Step-by-step explanation:

The portion of a shareholder-employee's salary that is classified as unreasonable does not have an effect on the amount of the shareholder-employee's gross income. However, it does result in an increase in the taxable income of the corporation. This means that the corporation will have to pay more in corporate income taxes.