A Business Generates Profit of $100,000

question 86

Multiple Choice

A business generates profit of $100,000. The owner has a 35% marginal tax rate. What amount of corporate and individual income tax will be paid on this profit if the business is an S corporation and no income is distributed?

• A) Corporate tax, $22,250; individual tax, $35,000
• B) Corporate tax, $22,250; individual tax, $0
• C) Corporate tax, $0; individual tax, $35,000
• D) Corporate tax, $22,250; individual tax, $27,213

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Definitions:

Order Paper

A negotiable instrument that is payable to a specific individual or entity, as named or identified in the document.

Drawee

The drawee is the party in a financial transaction, usually a bank, upon whom a check or draft is drawn and is responsible for paying the amount specified.

Maker

In financial terms, the party that creates or issues a promissory note, obligating themselves to pay a certain sum to a specified party.

Negotiable Instrument

A document in writing that confirms the payout of a designated amount of money, whether immediately upon demand or at a specific time, with the name of the person paying listed on it.