Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please type your answer John Johnson and his son, Joseph, own all outstanding stock of ABC Corporation. Both John and Joseph are officers in the

please type your answer
John Johnson and his son, Joseph, own all outstanding stock of ABC Corporation. Both John and Joseph are officers in the corporation and, together with their uncle, Sam, comprise the entire board of directors. ABC uses the cash method of accounting and has a calendar year-end. In late 2011, the board of directors adopted the following legally enforceable resolution (agreed to in writing by each of the officers):
o Salary payments made to an officer of the corporation that shall be disallowed in whole or in part as a deductible expense for Federal income tax purposes shall be reimbursed by such officer to the corporation to the full extent of the disallowance. It shall be the duty of the board of directors to enforce payment of each such amount.
In 2017, ABC paid John $800,000 in compensation and Joseph received $650,000. On an audit in late 2018, the IRS found the compensation of both officers to be excessive. The IRS disallowed deductions for $400,000 of the payment to John and $350,000 of the payment to Joseph. The IRS recharacterized the disallowed payments as constructive dividends. Complying with the resolution by the board of directors, both John and Joseph repaid the disallowed compensation to ABC Corporation in 2019. John and Joseph have asked you to determine how their repayments should be treated for tax purposes. Joseph is still working as a highly compensated executive for ABC, while John is retired and living off his savings.
Prepare a memo for your firms client files describing the results of your research. Use the format below to prepare your memorandum. Minimum 500 words for this assignment. Use Primary sources for your research in addition to treaties....
Tax Research Memorandum Sample Format
Date
TAX FILE MEMORANDUM
FROM: John Doe
TO: Company TAX FILE SUBJECT:
Facts:
Specific Issues:
Conclusion:
Law and Analysis:
Preparer ________
Reviewer ________
Partner ________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sovereign Debt Crisis The New Normal And The Newly Poor

Authors: D. Chorafas

1st Edition

0230298400, 9780230298408

More Books

Students also viewed these Accounting questions

Question

=+Do flexible schedules change the demand for resources?

Answered: 1 week ago

Question

2. What does the other person defi ne as the beginning?

Answered: 1 week ago

Question

1. What do you defi ne as the start of interaction?

Answered: 1 week ago