Juanita Owns 60% of the Stock in a C Corporation

question 3

Multiple Choice

Juanita owns 60% of the stock in a C corporation that had a profit of $200,000 in 2012. Carlos owns a 60% interest in a partnership that had a profit of $200,000 during the year. The corporation distributed $45,000 to Juanita, and the partnership distributed $45,000 to Carlos. Which of the following statements relating to 2012 is incorrect?

• A)Juanita must report $120,000 of income from the corporation.
• B)The corporation must pay corporate tax on $200,000 of income.
• C)Carlos must report $120,000 of income from the partnership.
• D)The partnership is not subject to a Federal entity-level income tax.
• E)None of the above.

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Definitions:

Structured

Organized in a coherent and systematic manner, often referring to financial products, settlements, or organizational planning.

Time-Consuming

Requiring a great deal of time to complete, often more than what is considered reasonable or necessary.

Negotiation/Mediation

A process where disputing parties come together to discuss their differences with the aim of reaching an agreement, with mediation involving a neutral third party to assist.

ADR

Alternative Dispute Resolution, a range of processes used to resolve conflicts outside of traditional court proceedings.