Flycatcher Corporation, a C Corporation, Has Two Equal Individual Shareholders

question 33

Multiple Choice

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

• A)Flycatcher cannot avoid the corporate tax altogether by paying out all $100,000 of net profit as dividends to the shareholders.
• B)Nancy incurs income tax of $1,500 on her dividend income.
• C)Pasqual incurs income tax of $1,500 on his dividend income.
• D)Flycatcher pays corporate tax of $22,250.
• E)None of the above.

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Definitions:

-uria

A suffix used in medical terminology to describe conditions related to urine, such as polyuria (production of a large volume of urine) or hematuria (presence of blood in urine).

-itis

Refers to inflammation or infection of a part of the body.

Hydro-

A prefix meaning water, used to denote a relationship to water or moisture in various scientific and technical contexts.

Albumin

A protein commonly found in blood plasma, vital for maintaining the osmotic pressure needed for proper distribution of body fluids.