Schatz Corporation Generated $8,083,000 Ordinary Business Income and Recognized a $73,900

question 23

Multiple Choice

Schatz Corporation generated $8,083,000 ordinary business income and recognized a $73,900 net capital gain on the sale of assets. Which of the following statements is true?

• A) Schatz must pay tax at the regular corporate rate on $8,156,900 taxable income.
• B) Schatz must pay tax at the regular corporate rate on $8,083,000 taxable income. The $73,900 capital gain is eligible for a preferential tax rate.
• C) Schatz's net capital gain results in a permanent book/tax difference.
• D) None of these choices are true.

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Definitions:

FICA

The Federal Insurance Contributions Act, a United States federal payroll tax that funds Social Security and Medicare.

Paycheck

A document (or electronic transfer) issued by an employer to pay an employee for services rendered.

Tax Burden

The measure of the total amount of taxes paid by an individual, a business, or another entity to the government.

Tax Burden

Refers to the total amount of tax that individuals or businesses must pay, relative to their income or profit.