1. Dean is the sole shareholder (10% ordinary income tax rate; 20% dividend income tax rate) of S corp, Bobs Bar. Bobs Bar 1) paid Dean $1,000 for repairing the bars roof; and 2) distributed a $2,000 dividend to Dean

Q1: What are the tax consequences to Dean?

Q2: As a shareholder/employee of Bobs Bar, what are the issues for Dean receiving both compensation for repairing the bars roof and dividend distribution from the both?

Q3: What would some of the factors to determine if the compensation paid to Dean by the bar was reasonable?

---------------------------------

2.

Which of the following conditions will prevent a corporation from qualifying as an S corporation?

a) The corporation has both common stock and preferred stock.

b) The corporation has one class of stock with different voting rights.

c) One shareholder is a US citizen

d) One shareholder is a US resident