17.A doctor pays his children $100,000 eachyear for "consulting services". The IRS plans todisallow that amount as a deduction on thedoctor's business tax return (Form 1120). Thechildren reported the income they received aswage income. However, the income is taxedat a relatively modest marginal income taxrate. Are there any steps that should be takento protect the doctor and his children?a.Nothing at this time. Plan to vigorouslycontest the deduction disallowance.b.Extend the statute of limitations onassessment of the Form 1120, thus delayingany action on the children's tax returns.c.File Form 1040X on behalf of the childrenmaking a protective refund claim of theincome tax the children paid. Also request arefund of any employment tax.d.File an amended Form 1120X protecting theparties and reallocating the payments to thechildren as a loan to the doctor/shareholder.

Given: A doctor pays the children $100,000 each year for “consulting services”. The options are…

17.A doctor pays his children $100,000 each year for "consulting services". The IRS plans to disallow that amount as a deduction on the doctor's business tax return (Form 1120). The children reported the income they received as wage income. However, the income is taxed at a relatively modest marginal income tax rate. Are there any steps that should be taken to protect the doctor and his children?

17.A doctor pays his children $100,000 each year for "consulting services". The IRS plans to disallow that amount as a deduction on the doctor's business tax return (Form 1120). The children reported the income they received as wage income. However, the income is taxed at a relatively modest marginal income tax rate. Are there any steps that should be taken to protect the doctor and his children?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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