After serving as an active director of Lee Corp. for twenty
years, Ryan was appointed an honorary director with the obligation
to attend directors’ meetings with no voting power. In 2012,
Ryan received an honorary director’s fee of $5,000. This fee is

(b) Directors’ fees are generally treated as self-employment
income and thus are subject to social security selfemployment
tax. Answer (a) is incorrect because directors’ fees
are not usually viewed as employee compensation; rather it is
treated as self-employment income. Answers (c) and (d) are
incorrect because director’s fees are treated as self-employment
income.