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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