Charleston Corporation (CC) Now Operates as a "Regular" Corporation, but It

question 54

Multiple Choice

Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by five stockholders who each hold 20% of the stock, and each faces a personal tax rate of 35%. The firm earns $2,000,000 per year before taxes, and since it has no need for retained earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rate is 35%. How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status?

• A) $86,632
• B) $88,400
• C) $90,168
• D) $91,971
• E) $93,811

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Definitions:

Leisure

Time spent away from work and essential duties, often engaging in recreational activities or relaxation.

Headphones

A pair of small loudspeaker drivers worn on or around the head over a user's ears to listen to audio signals privately.

Conglomeration

The process or state of combining multiple businesses or entities under one organization, typically to diversify interests and reduce risks.

Media Concentration

The phenomenon where a few companies or individuals own large shares of the mass media, leading to a reduction in the diversity of media voices and viewpoints.