1. What are examples of a possible result of the conflict of interest between shareholders and corporate managers?
Managers funding risky projects that could lose money.
Managers using company resources for personal benefit.
Managers paying themselves excessive salaries.
Managers faking earnings to temporarily boost the stock price.
2. Aaron Jennings, a partner in an engineering firm, is guaranteed a payment of $50,000 each year without regard to the firm's profit or losses. Assuming the payment is correctly reported to him on a Schedule K1, how should Aaron report this income on his return?
Passive Income, reported on Schedule E
Nonpassive income, reported on Schedule E
Wages, salaries, tips, etc. reported directly on Form 1040
Other Income, reported directly on Form 1040