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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