The Polaris S Corporation Has Operating Income of $50,000

question 51

Multiple Choice

The Polaris S Corporation has operating income of $50,000. Andrew is the sole shareholder of the corporation that has had the S election in effect since its inception. At the beginning of the current year, Andrew's basis in his S corporation stock is $2,000. During the year Andrew receives cash distributions totaling $55,000. How much income must Andrew recognize for the current tax year?

• A)$50,000 ordinary income; $55,000 dividend income.
• B)$50,000 ordinary income.
• C)$50,000 ordinary income; $3,000 capital gain.
• D)$55,000 dividend income; $3,000 capital gain.
• E)$55,000 dividend income.

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Definitions:

Economic Policy

Strategies and decisions made by the government concerning the economy, including taxation, government spending, and interest rates.

Economic Generalizations

Broad statements that apply to economic behavior or trends, often used to predict future economic outcomes.

Entrepreneur's Sole Function

The primary responsibility of an entrepreneur, often seen as identifying opportunities, allocating resources, and driving innovation and economic growth.

Marginal Analysis

An examination of the benefits and costs of one more unit of a product or activity to help make efficient allocation decisions.