Norma Formed Hyacinth Enterprises, a Proprietorship, in 2012

question 21

Multiple Choice

Norma formed Hyacinth Enterprises, a proprietorship, in 2012.In its first year, Hyacinth had operating income of $400,000 and operating expenses of $240,000.In addition, Hyacinth had a long-term capital loss of $10,000.Norma, the proprietor of Hyacinth Enterprises, withdrew $75,000 from Hyacinth during the year.Assuming Norma has no other capital gains or losses, how does this information affect her taxable income for 2012?

• A)Increases Norma's taxable income by $157,000 ($160,000 ordinary business income - $3,000 long-term capital loss).
• B)Increases Norma's taxable income by $150,000 ($160,000 ordinary business income - $10,000 long-term capital loss).
• C)Increases Norma's taxable income by $75,000.
• D)Increases Norma's taxable income by $160,000.
• E)None of the above.

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Definitions:

Networking

The process of interacting with others to exchange information and develop professional or social contacts.

Role Models

Individuals admired for their ways of living or success, who influence others by setting good examples.

Arrogance

Characterized by or revealing an exaggerated sense of one’s own importance or abilities.

Self-Selected Stakeholder

A person who chooses themselves to have an interest or investment in an initiative or project without being appointed or elected.