McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 24

Nicole and Braxton are each 50 percent shareholders of NB Corporation.Nicole is also an employee of the corporation.NB is a calendar-year tax-payer and uses the accrual method of accounting.The corporation pays its employees monthly on the first day of the month after the salary is earned by the employees.What issues must NB consider with respect to the deductibility of the wages it pays to Nicole if Nicole is Braxton's sister? What issues arise if Nicole and Braxton are unrelated?