Firefly Corporation Is a C Corporation

question 82

Multiple Choice

Firefly Corporation is a C corporation.Freya owns all of the stock.During the current year Firefly earned taxable income of $500,000 and paid a $300,000 dividend to Freya.Which of the following statements is correct?

• A)Firefly will pay corporate income tax on its earnings,and Freya will pay individual income tax on the dividends.
• B)Only Firefly will pay taxes.Freya will not pay any taxes due to her holdings in Firefly.
• C)Firefly's income will flow through to Freya's tax return,and she will pay the taxes on the $500,000 of corporate income.
• D)Firefly will not pay any taxes,but Freya will pay taxes on the dividend received.

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Definitions:

Current Account

The section of a country's balance of payments that records the value of exports and imports of goods and services, net earnings on overseas investments, and net transfer payments.

Money Inflow

The total amount of money entering an economy, business, or individual's account from various sources.

Trade Deficit

A situation that occurs when a country's imports of goods and services exceed its exports.

Inflow Of Payments

Money or resources coming into a business, organization, or economy.