In an S Corporation, Taxes Are "Passed Through

question 24

Multiple Choice

In an S corporation, taxes are "passed through." This means which of the following?

• A)the individual pays twice, taxes on profits and taxes on income
• B)the individual pays no taxes because the company has already been taxed
• C)income that the owner takes is reported on personal income taxes only
• D)the revenue that the owner takes to live on is not taxed

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Definitions:

Manufacturing Business

A company engaged in the production of goods by processing raw materials into finished products.

Merchandising Business

A type of business that purchases goods for resale to customers, making profits from the markup over the cost of goods sold.

Limited Liability Company

An organizational form blending the direct tax system of a sole proprietorship or partnership with the reduced liability features of a corporation.

Cost Concept

An accounting principle that states all assets and services purchased by a company should be recorded at their cost price.