If You Were Seeking an Entity with the Most Favorable

question 58

Multiple Choice

If you were seeking an entity with the most favorable tax treatment regarding (1) the number of owners allowed, (2) the flexibility to select your accounting period, and (3) the availability of preferential capital gains rates when selling your ownership interest, which entity should you decide to use?

• A) C corporation.
• B) Sole proprietorship.
• C) Partnership.
• D) S corporation.

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Definitions:

Variables

Elements, characteristics, or conditions that can change or vary in a data set or experiment.

Pie Chart

A round chart that is separated into segments to show numerical relationships.

Omitted Variables

Factors not included in a model that could influence its outcome or the relationship between variables studied.

Reverse Causality

The error committed when the true direction of causality between two variables is reversed, and the independent variable and the dependent variable are incorrectly identified.