Emma,the sole shareholder of Quail Corporation (a C corporation),has the corporation pay her a salary of $300,000 in 2008.The Tax Court has held that $80,000 represents unreasonable compensation.Assuming Emma is in the 35% bracket in 2008,the Tax Court's holding will reduce the total tax she pays in 2008.

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To the extent a salary payment is not considered reasonable,the payment is treated as a dividend,which is generally taxed at a maximum rate of 15%.The Tax Court's holding saves Emma $16,000 [$80,000 F1F1F1S1F1F1F10 (35% - 15%)].

Emma,the Sole Shareholder of Quail Corporation (A C Corporation),has the Corporation