N is the sole shareholder of ISA Corporation, an S corporation. In the current year the corporation has $50,000 of income and pays N no salary. ISA distributes $50,000 to N. If the IRS examines ISAs return for the year, which of the following is the most likely outcome?

a. The IRS will not likely make any adjustments if N has reported all of the income on his return.

b. The IRS will likely impose payroll taxes, as well as penalties and interest on the corporation for failing to report the $50,000 as compensation

c. The IRS will likely recharacterize the distributions as self-employment income to N.

d. The IRS will probably reclassify 50% of the distributions as compensation, but not impose any taxes, penalties or interest on the corporation.