Agnes Is the Sole Shareholder of Violet,Inc

Multiple Choice

Agnes is the sole shareholder of Violet,Inc.For 2010,she receives from Violet a salary of $200,000 and dividends of $100,000.Violet's taxable income for 2010 is $500,000.On audit,the IRS treats $50,000 of Agnes's salary as unreasonable.Which of the following statements is correct?

A) Agnes's gross income will increase by $50,000 as a result of the IRS adjustment.
B) Violet's taxable income will not be affected by the IRS adjustment.
C) Agnes's gross income will decrease by $50,000 as a result of the IRS adjustment.
D) Violet's taxable income will increase by $50,000 as a result of the IRS adjustment.
E) None of the above is correct.