Jim and Ginny have a very profitable corporation in which they are both corporate officers. The corporation has never paid dividends. The corporate business is known by the public as The Tasty Taco Company. They have 12 company-owned restaurants and 20 franchisees. Jim works with the franchise owners and Ginny does the books for the 12 company locations and she helps Jim with managing the operations. Jim is paid a salary of $5,000,000 per year and Ginny is paid $6,000,000 per year since she also does the accounting.
Ginny owns 42% of the common stock outstanding and Jim owns 48%. Ginny's mother owns the remaining 10% of the stock.
The balance sheet has $14,000,000 in retained earnings. Since it is so profitable, they "voted" to give bonuses to the two of them of $1,000,000 each and give Ginny's mom a $100,000 bonus.
In addition, Jim wants to have the corporation donate his corporate car to his daughter to drive to college and have the corporation buy another car for him to drive. Since that sounded like a good idea, Ginny decided to have the corporations donate her corporate car to her son who is just now turning 16.
Discuss the tax issues, if any, that can result from the plans described above.