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  • Is an excess salary paid to shareholder employees a constructive dividend?

    Yes. If an employee, who is also a shareholder, receives compensation that is significantly above market rate, then the excess compensation could be considered a constructive dividend. Compensation could include salary, bonuses, and/or directors fees.

  • Is the sale of an asset below FMV to a shareholder considered a constructive dividend?

    Yes, this would be an example of a constructive dividend if the asset was sold to a shareholder. As a reminder, a constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified […]

  • What is a constructive dividend?

    A constructive dividend is a payment, allowance, loan or other form of financial benefit from a corporation to a shareholder that is not intended to be a dividend payment but that ends up being classified by the IRS as a dividend. Examples of constructive dividends include excess salaries paid to shareholder employees, sale of assets below FMV, […]