Research Problem 2. Sean Moon is president, secretary, treasurer, sole director, and sole shareholder of Streetz, an S corporation real estate company. He manages all aspects of the company's operations, and he is the only person working at the company that holds a real estate broker's license. Sean works 12-hour days and takes few days off. Streetz's gross receipts and net income figures were reported as follows. Year Gross Receipts Net Income 1 $376,453 $122,605 2 405,244 161,660 3 518,189 231,454 Sean and his wife, Kim, filed joint Federal income tax returns, but they did not report any wages or salaries on line 7 of their Forms 1040. During year 3, Sean transferred $240,000 from the S corporation to his personal account. You are an expert witness for the IRS. Identify the items you would present to the U.S. Tax Court with respect to the amount of Sean's compensation that is subject to employment taxes and any other taxes due for year 3 (especially the Medicare net investment income tax). Hint: This is a reasonable compensation issue.
Research Problem 2. Sean Moon is president, secretary, treasurer, sole director, and sole shareholder of Streetz, an S corporation real estate company. He manages all aspects of the company's operations, and he is the only person working at the company that holds a real estate broker's license. Sean works 12-hour days and takes few days off. Streetz's gross receipts and net income figures were reported as follows. Year Gross Receipts Net Income 1 $376,453 $122,605 2 405,244 161,660 3 518,189 231,454 Sean and his wife, Kim, filed joint Federal income tax returns, but they did not report any wages or salaries on line 7 of their Forms 1040. During year 3, Sean transferred $240,000 from the S corporation to his personal account. You are an expert witness for the IRS. Identify the items you would present to the U.S. Tax Court with respect to the amount of Sean's compensation that is subject to employment taxes and any other taxes due for year 3 (especially the Medicare net investment income tax). Hint: This is a reasonable compensation issue.
Chapter22: S Corporations
Section: Chapter Questions
Problem 2RP
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Transcribed Image Text:Research Problem 2. Sean Moon is president, secretary, treasurer, sole director, and sole shareholder of
Streetz, an S corporation real estate company. He manages all aspects of the company's operations, and he is
the only person working at the company that holds a real estate broker's license. Sean works 12-hour days
and takes few days off. Streetz's gross receipts and net income figures were reported as follows.
Year
Gross Receipts
Net Income
1
$376,453
$122,605
2
405,244
161,660
3
518,189
231,454
Sean and his wife, Kim, filed joint Federal income tax returns, but they did not report any wages or salaries
on line 7 of their Forms 1040. During year 3, Sean transferred $240,000 from the S corporation to his
personal account.
You are an expert witness for the IRS. Identify the items you would present to the U.S. Tax Court with
respect to the amount of Sean's compensation that is subject to employment taxes and any other taxes due
for year 3 (especially the Medicare net investment income tax). Hint: This is a reasonable compensation
issue.
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