Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A)Other things held constant, it is generally safer to invest money in a proprietorship than in a corporation.
• B)There really is no difference between a general partnership and a corporation, because both have multiple owners and both offer limited liability to the owners.
• C)If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn $1,000,000 per year before taxes, you always can minimize the total taxes you pay by setting up the business as a corporation.
• D)According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's stock.
• E)Maximizing the income statement item "net income" might not be the best goal for a corporation if the managers are interested in maximizing the economic welfare of the firm's stockholders (that is, the firm's stock price).

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Definitions:

Wash Sale Rules

IRS regulations that disallow the claim of a capital loss for tax purposes if a substantially identical security is purchased within 30 days before or after the sale.

Loss Disallowed

A financial loss that cannot be deducted from taxable income as per tax regulations, often due to specific restrictions or limitations.

Personal Residence

The primary dwelling in which a person lives, often eligible for certain tax benefits, like the deduction of mortgage interest and property taxes.

Gain Recognize

Gain Recognize refers to the process of reporting the profit earned from the sale of an asset for tax purposes.