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

question 86

Multiple Choice

Luis is the sole shareholder of a C corporation, and Eduardo owns a sole proprietorship. Both businesses were started in 2012, 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 2012 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 2012 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:

Office Building

A structure designed for and occupied by one or more businesses or professionals.

New Equipment

Newly purchased or manufactured tools, machinery, or other apparatus intended for use in various industries or businesses.

Cost Recovery Deduction

A tax deduction that allows taxpayers to recover the cost of property or assets over time through depreciation or amortization.

§179 Expense

A section of the U.S. tax code that allows businesses to deduct the full purchase price of qualifying equipment and/or software within a tax year.