Carole Owns 75% of Pet Foods, Inc

question 1129

Multiple Choice

Carole owns 75% of Pet Foods, Inc. As CEO, Carole must travel extensively and does so on the company jet. In addition, she also uses the jet to take several personal vacations. Carole reports the value of the personal use of the jet, $40,000, as additional compensation. Which of the following is true in terms of the corporation?

• A) The corporation includes $40,000 as miscellaneous income.
• B) The corporation takes a deduction of $40,000 for dividend expense.
• C) The $40,000 has no impact on the corporation's income tax.
• D) The corporation takes a deduction of $40,000 for compensation expense.

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Definitions:

Renew

To extend the period of validity or operation of something, such as a contract or license.

Dissociate

To separate or remove oneself from a particular association, partnership, or relationship, especially in a legal or formal context.

Wound Up

Completing or finalizing affairs, often in the context of dissolving a company and distributing its assets.

Liquidated

A term referring to a debt or obligation that has been determined, settled, or resolved.