Red Corporation, a C Corporation That Has Two Equal Shareholders

question 99

Essay

Red Corporation, a C corporation that has two equal shareholders, earned $450,000 during 2011. Orange Company, a partnership that has two equal partners, earned $450,000 during the year. Red did not make any distributions to its shareholders, and Orange's partners did not make any withdrawals. Contrast the tax treatment of the shareholders of Red Corporation and the partners of Orange Company.

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Definitions:

Increasing Returns

A situation in production where an increase in the amount of inputs results in a disproportionately larger increase in output.

Production Isoquant

A curve that represents all combinations of inputs that produce the same level of output, used in the analysis of production technology.

Marginal Products

The additional output that is produced by using one more unit of a particular input, holding other inputs constant, critical in the analysis of production efficiency.

Profitability

A measure of the efficiency with which a company or a business utilizes its resources to generate profits.