Flycatcher Corporation,a C Corporation,has Two Equal Individual Shareholders,Nancy and Pasqual

question 33

Multiple Choice

Flycatcher Corporation,a C corporation,has two equal individual shareholders,Nancy and Pasqual.In the current year,Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder.Regardless of any tax consequences resulting from their interests in Flycatcher,Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket.With respect to the current year,which of the following statements is incorrect?

• A)Flycatcher cannot avoid the corporate tax altogether by distributing all $100,000 of net profit as dividends to the shareholders.
• B)Nancy incurs income tax of $1,500 on her dividend income.
• C)Pasqual incurs income tax of $1,500 on his dividend income.
• D)Flycatcher pays corporate tax of $22,250.
• E)None of the above.

---

Definitions:

Target Pricing

A pricing strategy in which the selling price of a product is determined based on the desired profit margin and market conditions.

Ultimate Consumers

The end users who purchase products or services for personal use and not for manufacturing or resale purposes.

Odd-even Pricing

A pricing strategy that involves setting prices just below a round number, e.g., $99.99 instead of $100, to make a product seem less expensive.

Target Pricing

A pricing method in which a company sets a price based on what the customer is willing to pay and then designs the product to meet that price.