Luis Is the Sole Shareholder of a C Corporation, and Eduardo

question 57

Multiple Choice

Luis is the sole shareholder of a C corporation, and Eduardo owns a sole proprietorship. Both businesses were started in 2011, and each business has a long-term capital gain of $20,000 for the year. Neither business made any distributions during the year. With respect to this information, which of the following statements is incorrect?

• A) Eduardo must report a $20,000 long-term capital gain on his 2011 tax return.
• B) Louis's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain.
• C) Luis must report a $20,000 long-term capital gain on his 2011 tax return.
• D) Eduardo receives a preferential tax rate on a long-term capital gain of $20,000.
• E) None of the above.

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Definitions:

Japan

A country located in East Asia, known for its rich culture, technological advancements, and as the world's third-largest economy by nominal GDP.

Negative APS

Refers to a situation where average propensity to save is below zero, indicating that consumption exceeds income, leading to dissavings.

Disposable Income

The net income available to an individual or household after taxes have been deducted, used for savings or spending on goods and services.

Induced Consumption

An increase in spending on goods and services caused by an increase in income, reflecting a direct relationship between income levels and consumer spending.