Bjorn Owns a 60% Interest in an S Corporation That

question 29

Multiple Choice

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2013. He also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How much income must Bjorn report from these businesses?

• A) $0 income from the S corporation and $30,000 income from the C corporation.
• B) $30,000 income from the S corporation and $30,000 of dividend income from the C corporation.
• C) $90,000 income from the S corporation and $0 income from the C corporation.
• D) $90,000 income from the S corporation and $30,000 income from the C corporation.
• E) None of the above.

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Definitions:

Marginal Cost

The uptick in cost associated with producing an extra unit of a product or service.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a benefit to consumers exactly equal to the cost of producing it.

Product Mix

The total range of products that a company offers for sale, encompassing different lines, variations, and services to meet consumer needs.

Marginal Cost

The cost of producing one additional unit of a good or service, which can vary depending on the level of production.