An S Corporation Has the Following Information for Its Taxable

question 48

Multiple Choice

An S corporation has the following information for its taxable year: Net ordinary income before the items below are considered $65,000 $$\begin{array} { l l } \text { Salary to Z } & ( 18,000 ) \\\text { Rental income } & 22,000 \\\text { Rental expenses } & ( 29,000 ) \\\text { Net income } & \$ 40,000\end{array}$$ Z, a 50 percent owner, performs services for the business.Z's self-employment income from the corporation, which is subject to self-employment tax, is

• A)$0
• B)$18,000
• C)$41,500
• D)$23,500
• E)$38,000

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor, contrasted with fixed costs.

Indirect Costs

Expenses not directly tied to the production of goods or services, such as rent, utilities, and administrative salaries.

Direct Costs

Costs that can be directly attributed to a specific product or cost object without needing allocation.

Joint Costs

Expenses incurred in the process of producing two or more products at the same time, which cannot be easily attributed to individual products.