Firefly Corporation Is a C Corporation

question 299

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

---

Definitions:

Summit of the Volcano

The highest point or peak of a volcano, typically surrounding the opening or vent where lava and volcanic gases are expelled.

Melting of Snow Caps

The process by which the accumulated snow on mountain peaks or polar regions turns into water during warmer temperatures.

Gas Release

The process by which gases are expelled from geological or biological sources, including volcanic eruptions and respiration.

Hot Magma

Molten or partially molten rock beneath the Earth's surface, from which igneous rocks are formed.