C. Marvin Nelson graduated from Shyster Law School in May, 2015. Shortly thereafter, he formed his own law practice as an S corporation he was the sole shareholder. As a start-up practice, he had only one employee-his legal secretary. Marvin's friend, Sam Shady, a landscaper, told him that because he had an S corporation, he could take distributions from the corporation instead of wages and that would save him some taxes. In 2016, Marvin reported an S corporation income of $30,000 and no wages (instead, he took $36,000 in distributions). In 2017, he reported wages of $15,000 (he took distributions of $56,000) and S corporation income of $16,000. The IRS audited his returns for the two years and reclassified the distributions as compensation. Marvin now comes to you to find out whether the IRS can reclassify the amounts paid out to him. C. Marvin Nelson graduated from Shyster Law School in May, 2015. Shortly thereafter, he formed his own law practice as an S corporation he was the sole shareholder. As a start-up practice, he had only one employee-his legal secretary. Marvin's friend, Sam Shady, a landscaper, told him that because he had an S corporation, he could take distributions from the corporation instead of wages and that would save him some taxes. In 2016, Marvin reported an S corporation income of $30,000 and no wages (instead, he took $36,000 in distributions). In 2017, he reported wages of $15,000 (he took distributions of $56,000) and S corporation income of $16,000. The IRS audited his returns for the two years and reclassified the distributions as compensation. Marvin now comes to you to find out whether the IRS can reclassify the amounts paid out to him.