A Business Generates Profit of $100,000

question 55

Multiple Choice

A business generates profit of $100,000.The owner has a 39.6% 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,$39,600
• B)Corporate tax,$22,250; individual tax,$0
• C)Corporate tax,$0; individual tax,$39,600
• D)Corporate tax,$22,250; individual tax,$15,550

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Definitions:

Production Possibility Frontier

A graph showing the highest possible combinations of two goods that can be made using existing resources and technology.

Output Efficiency

The optimized state where goods or services are produced at the lowest possible cost and with the best allocation of resources.

Marginal Rate

The rate at which one variable changes with respect to a slight change in another variable, often used in the context of taxes or production.

Transformation

The process of changing the structure, appearance, or character of something, often seen in economic contexts as shifts in production or technology.