Which of the Following Is an Incorrect Statement Regarding Subchapter

question 27

Multiple Choice

Which of the following is an incorrect statement regarding Subchapter S corporations?

• A) Subchapter S corporations may issue only one class of stock.
• B) Subchapter S corporations may be domestic or foreign, but they cannot be alien.
• C) Taxation in Subchapter S corporations is pass-through, like partnership taxation.
• D) Subchapter S corporations may not have more than 100 shareholders.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds.

Capital Structure

The composition of a company's funding, including debt, equity, and other financial instruments, which defines how a company finances its overall operations and growth.

Debt

Money that is owed or due to be paid, typically resulting from borrowing funds to be repaid with interest.

Financial Leverage

Financial leverage is the use of borrowed money (debt) to amplify the potential returns from an investment or project.