The S Corporation Form Is Often Compared to the Partnership

question 47

Multiple Choice

The S corporation form is often compared to the partnership form.Though they are similar in many ways, there are significant differences.Which of the following comparative statements is true?

• A)S corporations pay income tax on net ordinary income while partnerships do not.
• B)Partnership transfers of property to owners are taxable transactions at the partnership level, whereas corporate transfers of property to owners are not taxable to S corporations.
• C)Self-employment taxes on a partner's guaranteed compensation are not a deductible expense for the partnership, but FICA taxes on a shareholder's reasonable salary are deductible by the S corporation.
• D)A partnership pays tax on capital gains and distributes capital losses to the partners, while an S corporation flows through capital gains and losses to the shareholders.

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Definitions:

Whorfian Hypothesis

A linguistic theory that suggests the structure of a language influences its speakers' worldview or cognition.

Empirical Research

A way of gaining knowledge by means of direct observation or experience, typically involving systematic data collection and analysis.

Cultural Differences

Variations in the practices, values, and beliefs among different societies and groups.

Benjamin Whorf

A linguist known for his hypothesis that the structure of a language affects its speakers' perception and categorization of their experience, known as linguistic relativity.