A Business Has the Following Information: Net Ordinary Income Before $\quad$

question 24

Multiple Choice

A business has the following information: Net ordinary income before the
items below are considered $\quad$$\$ 65,000$
Guaranteed compensation to $Z ( \quad18,000 )$
Rental income $\quad$ 20,000
Rental expenses $\quad$$( 27,000 )$
Net income $\quad \$ 40,000$ If Z performs services for the business, which of the following statements is false?

• A)Z's self-employment income is $65,000 if the business is a proprietorship.
• B)Z's self-employment income is $36,800 if Z is a 40 percent shareholder of an S corporation.
• C)Z's self-employment income is $18,000 if Z is a limited partner who receives 40 percent of the profits and losses.
• D)Z has no self-employment income if Z is a 40 percent shareholder of a C corporation.

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Definitions:

Financial Institution

An establishment that conducts financial transactions such as investments, loans, and deposits.

Household Debt/income Ratio

A measure comparing the debt level of a household to its income, indicating financial health and borrowing capacity.

Interest Payments

The regular required payments made by a borrower to a lender for the use of borrowed money, usually a portion of the loan amount.

Interest-only Loans

Loans for which the borrower pays only the interest on the principal balance, with the principal amount remaining unchanged over a set term.