Which of the following payments could be treated as a constructive dividend by the IRS?
A) End-of-year bonus payment to a shareholder/employee.
B) Rent paid to a shareholder/lessor.
C) Interest paid to a shareholder/creditor.
D) All of these payments could be treated as a constructive dividend by the IRS

Question

Quizplus · Accepted Answer

All of these payments could be treated as a constructive dividend by the IRS. A constructive dividend is a payment made by a company that is not technically a dividend but is intended to benefit a shareholder in some other way, such as providing compensation for services rendered or providing a source of income for a creditor or lessor. This can include end-of-year bonuses, rental payments, and interest payments to shareholders. If the IRS determines that these payments were intended to benefit a shareholder rather than simply being legitimate business expenses, they can be treated as a constructive dividend and subject to taxation as such.

Which of the Following Payments Could Be Treated as a Constructive