Explain what are the income tax and fica tax

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Reference no: EM1340843

Application Problem

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).

Reference no: EM1340843

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