Lemon Corporation Incurs the Following Transactions

question 59

Multiple Choice

Lemon Corporation incurs the following transactions. Lemon maintains a valid S election and does not distribute any dividends to its shareholder, Patty.As a result, Patty must recognize ignore the 20% QBI deduction) :

• A)Ordinary income of $115,000 and long-term capital gain of $5,000
• B)Ordinary income of $115,000, long-term capital gain of $9,000, and $4,000 short-term capital loss.
• C)Ordinary income of $120,000.
• D)Capital gain of $120,000.

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Definitions:

Income Earns

The compensation received by an individual or generated by an entity in exchange for labor or services or as earnings from investments.

Afford

The financial capacity to purchase something, indicating that the cost does not exceed the buyer’s purchasing power or budget constraints.

Optimum Purchasing

The process of buying goods and services in the most efficient and cost-effective manner, maximizing value for the purchaser.

Sweaters

Garments intended for upper body warmth, traditionally made from wool but now also from synthetic fibers.