Lucinda Is a 60% Shareholder in Rhea Corporation, a Calendar

question 82

Multiple Choice

Lucinda is a 60% shareholder in Rhea Corporation, a calendar year S corporation.During the year, Rhea Corporation had gross income of $550,000 and operating expenses of $380,000.In addition, the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000.During the year, Rhea Corporation distributed $50,000 to Lucinda.With respect to this information, which of the following statements is correct?

• A)Rhea Corporation will pay tax on taxable income of $200,000.
• B)Lucinda reports ordinary income of $50,000.
• C)Lucinda reports ordinary income of $120,000.
• D)Lucinda reports ordinary income of $102,000 and a short-term capital gain of $18,000.
• E)None of the above.

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Definitions:

Magnitude of Consequences

The significance or impact of the outcomes resulting from a decision or action, considering both its positive and negative aspects.

Social Consensus

Agreement within a group or society on beliefs, values, or social norms.

Self-Serving Decisions

Decisions made with the primary goal of benefiting oneself, often at the expense of others or the common good.

Hedonist Principle

A principle suggesting that people are motivated to engage in behaviors that produce pleasure or avoid pain.