Lucinda Is a 60% Shareholder in Rhea Corporation,a Calendar Year

question 28

Multiple Choice

Lucinda is a 60% shareholder in Rhea Corporation,a calendar year S corporation.During the current year,Rhea Corporation had gross income of $550,000 and operating expenses of $380,000.In addition,the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000.During the year,Rhea Corporation distributed $50,000 to Lucinda.With respect to this information,which of the following statements is correct?

• A)Rhea Corporation will pay tax on taxable income of $200,000.
• B)Lucinda reports ordinary income of $50,000.
• C)Lucinda reports ordinary income of $120,000.
• D)Lucinda reports ordinary income of $102,000 and a short-term capital gain of $18,000.
• E)None of the above.

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Definitions:

Product Development Strategies

Plans and methodologies adopted by businesses to create new products or improve existing ones.

Acquiring

The act of obtaining or gaining possession of resources, assets, or companies.

Technology

The application of scientific knowledge for practical purposes, especially in industry and improvements in tools, machinery, and devices.

Customer Participation

The involvement of customers in the production process or service delivery, which can influence their perceptions of the service quality.