Lisa and her daughter Jane are equal shareholders in Lisa’s Flooring, Inc. Lisa founded the and was the sole owner for over twenty years. The company is very successful and Lisa has accumulated a fairly large estate. When Jane turned age 25 last year, Lisa gave her half of the corporation’s stock. The gift was properly reported on Lisa’s gift tax return. Both Lisa and Jane now work full-time for the Lisa received a salary of $55,000 per year before Jane started working for the company. After Jane started working, Lisa reduced her salary to $15,000 and started paying Jane a salary of $50,000. Lisa indicates that she still makes most major decisions in the company, but she hopes that Jane will play a more important role as she becomes more familiar with the company. What tax issues should Lisa and the consider?
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