An Individual in the Top Tax Bracket Is Planning to Establish

question 32

Multiple Choice

An individual in the top tax bracket is planning to establish a new corporation and is weighing the choice between the C corporation form and the S corporation form.She expects the corporation to be profitable each year,with all profits reinvested excepted to the extent needed to pay corporate taxes or shareholder taxes on profits.The shareholder's plan is to sell the business after six years for a substantial gain.The C corporation will qualify as a small business corporation under Sec.1202.Applying the C Corporation Model and the Flow-Through Model

• A)the C corporation form will provide a greater return for the period of ownership if the stock is sold after the six years.
• B)the S corporation will provide the greater return for the period of ownership if the stock is sold after the six years.
• C)the S corporation will provide the greater return for the period of ownership if the stock is instead sold before five years.
• D)Both A and C are correct.

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Definitions:

Preoperational Stage

The second stage in Piaget's theory of cognitive development, occurring roughly between the ages of 2 and 7, characterized by symbolic thinking, egocentrism, and a lack of logical reasoning.

Sensorimotor Stage

The first stage of cognitive development in Piaget's theory, where infants learn about the environment through their senses and actions.

Impossible Event

An event with no chance of occurring, often considered in theoretical or mathematical contexts where the probability is zero.

Toy Car

A miniature representation of an automobile, designed as a plaything for children.