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:

Coalition

An alliance between individuals, groups, or nations, formed temporarily to achieve a specific goal, often combining resources for greater influence or power.

Stalemate

A situation, often in a game of chess, where no move can lead to a checkmate, resulting in a draw; metaphorically, any situation where progress is impossible.

Alliance

A formal agreement or partnership between individuals, businesses, or countries to pursue shared goals or to meet common objectives.

Forgive Remember

The process of choosing to forgive someone while still remembering the incident to learn from it without holding a grudge.