Determine the Amount of Income That Sarah Would Have from Micon

question 34

Essay

Determine the amount of income that Sarah would have from Micon Company in each of the following situations. Sarah is a 50% owner and receives a salary of $40,000 from Micon Company. The salaries are not included in the Micon Company's $250,000 taxable income.
a.Micon Company is a corporation and pays $50,000 in dividends.
b.Micon Company is an S corporation and pays $50,000 in dividends.
c.Micon Company is a partnership and it distributes $50,000 in cash to the partners. Sarah's salary is not a guaranteed payment.
d.Micon Company is a partnership and it distributes $50,000 in cash to the partners. Sarah's salary is a guaranteed payment.

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Definitions:

Political Risk

Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency for domestic currency, or other changes in the business climate of a country.

Expropriation

The act of a government taking privately owned property, usually for public use or in the public interest, potentially with compensation.

Foreign Exchange Transactions

Trades between two parties to exchange one currency for another, determining the relative value of different currencies.

Largest Stock Market

Typically refers to the New York Stock Exchange (NYSE) or the NASDAQ, both of which are among the largest and most influential stock markets globally.