Mr. and Mrs. Soon are the sole shareholders of SW Inc. For the last three years, SW

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Mr. and Mrs. Soon are the sole shareholders of SW Inc. For the last three years, SW has employed their son as a sales representative and paid him a $30,000 annual salary. During a recent IRS audit, the revenue agent discovered that the son has never made a sale and spends most of his time playing saxophone in a jazz band. Determine the potential effect of this discovery on SW's taxable income and on Mr. and Mrs. Soon's taxable income under the following assumptions:

a. SW Inc. is an S corporation.

b. SW Inc. is a C corporation.

Assume the taxable year is 2018.

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Principles Of Taxation For Business And Investment Planning 2019 Edition

ISBN: 9781260161472

22nd Edition

Authors: Sally Jones, Shelley C. Rhoades Catanach, Sandra R Callaghan

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