Atomic Corporation Is Enjoying a Very Profitable Year

question 82

Multiple Choice

Atomic Corporation is enjoying a very profitable year.The board of directors is considering paying either a bonus to the president of the corporation or an extra dividend to the shareholder.Shinil is both the president and the 100% shareholder.Which of the following statements is generally correct with respect to closely held corporations in Atomic's position?

• A)For tax purposes,the corporation will prefer to pay the bonus.
• B)For tax purposes,the corporation will prefer to pay the dividend.
• C)The owner-manager will only be taxed on the bonus,not the dividend.
• D)The corporation's taxable income will be impacted in the same manner by both the bonus and the dividend payments.

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Definitions:

Business Receipts

The total revenue received by a business from goods sold or services provided during a specific period.

Bondholders

Individuals or entities that own bonds, which are debt securities issued by corporations or governments, entitling them to receive a fixed amount of interest and repayment of principal.

Incorporating

The process of legally declaring a business as a corporation, enabling the owners to separate their personal assets from the business assets.

Liability

A financial obligation or debt that an individual or company owes, which must eventually be settled or paid off.