If C Corporations Retain Their After-Tax Earnings, When Will Their

question 26

Multiple Choice

If C corporations retain their after-tax earnings, when will their shareholders be taxed on the retained earnings?

• A) Shareholders will be taxed on undistributed retained earnings in the year the corporation files its tax return.
• B) Shareholders will be taxed in the year they elect to be taxed on undistributed retained earnings.
• C) Shareholders will be taxed when they sell their shares at a gain.
• D) None of the choices are correct.

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Definitions:

Purchases Discounts

Reductions in price offered by suppliers to buyers as an incentive for early payment of their purchase invoices.

Periodic Inventory System

An inventory valuation method where updates to inventory levels are made periodically, typically at the end of an accounting period, rather than after each sale or purchase.

Purchases Discounts

Reductions in price given by suppliers for early payment of invoices.

Freight In

The cost associated with transporting goods into a warehouse, typically considered a part of the inventory cost.