Question

Aaron, a shareholder-employee of Pigeon, Inc., receives a $300,000 salary. The IRS classifies $100,000 of this amount as unreasonable compensation. The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000

Answer 1

Answer: Incomplete question.

True or False

Answer is False

Explanation: from the above question, The IRS reclassifies $100,000 of Aaron's salary as unreasonable compensation will increase Pigeon's net income by $100,000 and increase the dividend payable by $100,000 but will not affect the gross profit of the company while Aarons gross income will decrease by $100,000