Where and how do you draw the line

Reference no: EM131973963

Problem

Sam is the sole shareholder of XYZ Inc. (S corporation) and serves as CEO of XYZ Inc. If XYZ has net earnings of $1,000,000 in 2016, can Sam take the entire $1 million out of XYZ in the form of distributions (thus avoiding SE taxes), or must he take some of the earnings as wages (subject to SE taxes)? Where and how do you draw the line?

Reference no: EM131973963

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