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Mr. Bern Income Taxes

Mr. Bern, who is in the 35 percent marginal tax bracket, is the sole shareholder and
CEO of Bern Products. His salary this year was $345,000, and the corporation's taxable
income was $1,211,000.

a. What are the income tax and FICA tax consequences to Mr. Bern if the IRS determines
that $100,000 of his salary is unreasonable compensation?

b. What are the income tax and FICA tax consequences to Bern Products if the IRS
determines that $100,000 of Mr. Bern's salary is unreasonable compensation?

When you have completed your analysis and reached a conclusion, write a brief memo to your client in which you do the following:

a. Describe the steps you utilized in conducting your research.
b. List any tax principles used in your analysis.
c. Assess the likelihood that the IRS will challenge your position (state the likelihood of challenge in terms of a percentage).

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Income Tax, Tax Principles and its application analysis document is ...

Solution Summary

An explanation for Mr. Bern and his marginal tax bracket and salary considerations.

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