Arthur Is the Sole Shareholder of Purple, Inc

Multiple Choice

Arthur is the sole shareholder of Purple, Inc. Purple's taxable income before the payment of Arthur's salary is $300,000. Based on this information, Arthur has the corporation pay him a salary of $200,000 and a bonus of $100,000. A reasonable salary and bonus would be $175,000. Which of the following is correct?

A) The taxable income of Purple, Inc., is $0 ($300,000 - $300,000 salary and bonus) .
B) The taxable income of Purple, Inc., is $100,000 ($300,000 - $200,000) .
C) Arthur has salary and bonus income of $300,000.
D) Arthur has salary and bonus income of $175,000 and dividend income of $125,000.
E) None of the above.