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Arthur is the sole shareholder of Purple, Inc. Purples taxable income before the payment of Arthurs salary is $300,000. Based on this information, Arthur has
Arthur is the sole shareholder of Purple, Inc. Purples taxable income before the payment of Arthurs salary is $300,000. Based on this information, Arthur has the corporation pay him a salary of $200,000 and a bonus of $100,000. A reasonable salary and bonus would be $175,000. Please explain in detail how the IRS is likely to respond if Purple is subject to an audit? Which tax penalty provisions may apply?
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