Marcia Is a Shareholder in an S Corporation and Also

question 29

Multiple Choice

Marcia is a shareholder in an S corporation and also works for the corporation. This year, her share of ordinary income was $250,000 and her compensation was $100,000. Which of the following accurately describes her tax consequences from these earnings?

• A) Both the ordinary income and the compensation are subject to income tax and self-employment tax.
• B) Both the ordinary income and the compensation are subject to income tax and the compensation is subject to payroll tax.
• C) Both the ordinary income and the compensation are subject to income tax and the compensation is subject to self-employment tax.
• D) The ordinary income is subject to income and self-employment tax; the compensation is subject to income and payroll tax.

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Definitions:

Biochemical Abnormalities

Refers to unusual levels or concentrations of substances in the body that may indicate disease or a genetic disorder.

Cultural Pressures

The influence exerted by society or culture on individuals to conform to certain behaviors, norms, or values.

Alfred Kinsey

An American biologist and sexologist who founded the Kinsey Institute and is known for his research on human sexuality.

Sexual Behavior

Actions relating to how individuals or groups express their sexuality, an area of interest in psychology, biology, and sociology due to its complexity and influence on society and personal identity.