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 29

{Research} Ultimate Comfort Blankets Inc.has had a great couple of years and wants to distribute its earnings while avoiding the double tax.It decides to give its sole shareholder, Laura, a salary of $1,500,000 in the current year.What factors would the courts examine to determine if Laura's salary is reasonable? [Hint: See Elliotts, Inc.v.Commissioner, 716 F.d 1241 (9th Cir.1983)].