Reference no: EM133087987

Question - Morey wrote several books during the 2020 under an assumed name and had the royalty income received from the publisher for use of the books paid to Booker Corporation, a C corporation Morey formed in 2017. At the time Morey formed the corporation, he gave all the corporate stock to his 2 children (now age 4 and 5). As the sole shareholder-employees of Booker Corporation, the children were paid salaries in 2020 approximating the royalty income received by the corporation in 2020, so that the corporation reported zero taxable income. Assume 2020 is the first year the royalties have been received and salaries have been paid. What concerns, if any, do you have regarding how these transactions are being reported by the corporation, Morey, and the children?