Agnes is the sole shareholder of Violet, Inc., for 2011, and she receives from Violet a salary of $200,000 and dividends of $100,000. Violet's taxable income for 2011 is $500,000. On audit, the IRS treats $50,000 of Agnes's salary as unreasonable. Which of the following statements is correct

Agnes's gross income will increase by $50,000 as a result of the IRS adjustment. Violet's taxable income will not be affected by the IRS adjustment. Agnes's gross income will decrease by $50,000 as a result of the IRS adjustment. Violet's taxable income will increase by $50,000 as a result of the IRS adjustment. None of the above