Question :

Brad owns a successful corporation that has substantial earnings and profits. During the year, the subsequent payments were made by the corporation:

a. Salary of $250,000 to Brad. Officers in other corporations performing same services receive between $50,000 and $85,000

b. Rent of $25,000 to Brad. The rent is paid in connection with an office building owned by Brad and used by the corporation. Same buildings rent for about the same amount.

c. Salary of $5,000 to Brad's daughter, who worked for the company full-time during the part-time and summer during the rest of the year while she attended high school.

d. Alimony of $40,000 to Brad's former wife. Although Brad was individually obligated to prepare the payments, he used corporation funds to do the payments.

Show the likelihood of these payments being treated as constructive dividends. If a payment is deemed to be a constructive dividend, show how such a payment will be treated.