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:

Personal Expenses

Personal expenses are out-of-pocket costs individuals incur in their daily lives, not related to business or professional obligations.

Eliminating Debts

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A cooperative activity in which people network and pool funds and other resources via the Internet to assist a cause (such as disaster relief) or invest in a business venture (such as a startup).