Luis Is the Sole Shareholder of a Regular C Corporation

question 5

Multiple Choice

Luis is the sole shareholder of a regular C corporation, and Eduardo owns a proprietorship. In the current year, both businesses make a profit of $80,000 and each owner withdraws $50,000 from his business. With respect to this information, which of the following statements is incorrect?

• A) Eduardo must report $80,000 of income on his return.
• B) Luis must report $80,000 of income on his return.
• C) Eduardo's proprietorship is not required to pay income tax on $80,000.
• D) Luis's corporation must pay income tax on $80,000.
• E) None of these.

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Definitions:

Compounded Quarterly

The process of calculating and adding interest to the principal sum of an investment or loan on a quarterly basis, thus increasing the amount on which subsequent interest is calculated.

Semiannually Compounded

Interest calculation method where the interest earned is added to the principal twice per year, effectively growing the investment more quickly than simple interest.

Compound Annual

A calculation of the total compound interest earned or payable over a period of one year.

Hourly Wage

The amount of money paid for each hour of work, commonly used in part-time and some full-time employment.