?Lemon Corporation Incurs the Following Transactions ?
Lemon Maintains a Valid S Election and Does Not

question 36

Multiple Choice

?Lemon Corporation incurs the following transactions. ? $$\begin{array} { l r } \text { Net income from operations } & \$ 110,000 \\\text { Interest income from saving account } & 5,000 \\\text { Long-term capital gain from sale of securities } & 9,000 \\\text { Short-term capital loss from sale of securities } & 4,000\end{array}$$ ?
Lemon maintains a valid S election and does not distribute any dividends to its shareholder,
Patty.As a result, Patty must recognize:

• A)?Ordinary income of $115,000 and long-term capital gain of $5,000
• B)?Ordinary income of $115,000, long-term capital gain of $9,000 and $4,000 short-term capital loss.
• C)?Ordinary income of $120,000.
• D)?None of the above.

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Definitions:

Weighted Average Flotation Cost

The average cost of issuing new securities, weighed by the proportion each method of financing contributes to the total new financing, considering costs like underwriting fees and legal expenses.

Flotation Costs

The costs a company faces when issuing new securities, including fees for underwriting, legal services, and registration.

Net Present Value

The value of all future cash flows from a project or investment adjusted to their present value using a discount rate.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary depending on income level or earnings before taxes.