Paula is the sole shareholder of Violet, Inc. For 2021, she receives from Violet a salary of $300,000 and dividends of $100,000. Violet's taxable income for 2021 is $500,000. On audit, the IRS treats $100,000 of Paula's salary as unreasonable. Which of the following statements is correct?

a.Violet's taxable income will increase by $100,000 as a result of the IRS adjustment.

b.Violet's taxable income will not be affected by the IRS adjustment.

c.Paula's gross income will increase by $100,000 as a result of the IRS adjustment.

d.Paula's gross income will decrease by $100,000 as a result of the IRS adjustment.