Fireball Corporation Is an S Corporation

question 1367

Multiple Choice

Fireball Corporation is an S corporation. Leyla owns all of the stock. During the current year, Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla. Which of the following statements is correct?

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

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Definitions:

Expectations Decrease

A reduction in the anticipated or desired outcomes, often leading to adjusted objectives or satisfaction levels.

Rough Order of Magnitude

An early estimate that gives a general sense of a project's size, cost, or duration, often with wide variances.

Ballpark Estimate

A rough approximation or preliminary calculation of cost or value, not intended to be exact but giving a general idea.

Risk Analysis

The systematic study and assessment of potential hazards that could impede achieving project or organizational goals, focusing on prevention and mitigation strategies.