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Sam Bryant is a Social Media content provider who is the majority shareholder ( owns 8 0 % ) of Bryant Media, Inc., an S
Sam Bryant is a Social Media content provider who is the majority shareholder
owns of Bryant Media, Inc., an S Corporation, and he is married. Sam files
a return with his spouse Jo Ann as married filing jointly. The other owners are
owner is an investor, Jered Johnson and is also active in the business. Jerad
files a return with his spouse as married filing jointly. The remaining are
owned by Joseph Fenway who is only an investor not actively involved in the
business. The S Corporations income is all the Bryants income on their tax
return. The corporation offers engineering services. He also has ten employees
working for the Company with wages of $ Bryant does not receive any
regular payments from the corporation as compensation, but he withdraws
funds as the need arises. During the current year, he withdrew $ and
the total net income of the corporation is $ The corporation does not
deduct the withdraws, nor does Bryant include it in gross income. Bryant does,
report his S Corporation K in gross income on his Schedule E of $
prepared by his CPA. The other active owner Jerad Johnson reports $
of S Corporation of Income on his and received $ of withdraws
from the S Corporation. Joseph the passive owner also receives $ of
withdraws and reports his S Corporation income on Sch E as a single taxpayer of
$ from his K he received from the corporation.
Because all the shareholders have recognized the corporations income in their
respective form neither see any reason to pay a salary. They justify the
treatment by arguing that they are not employees of the corporation, and that
the Federal and State income tax consequences are identical for both.
Please identify the issues and risks in a tax memorandum to the file of any with
the positions. Discuss all aspects all the shareholders
If the facts are not present to answer the question you must provide your
assumptions in your research memorandum.
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