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

question 28

Multiple Choice

Lucinda is a 60% shareholder in Rhea Corporation,a calendar year S corporation.During the current 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.

---

Definitions:

Weber's Law

Weber's Law is a principle in psychology that states the smallest change in a stimulus that can be detected is a constant proportion of the stimulus level.

Color Receptors

Specialized cells located in the retina of the eye (cones) that are sensitive to different wavelengths of light, enabling the perception of color.

High-Pitched Stimulus

A sound or signal at the higher end of the auditory frequency range, often perceived as sharp or shrill.

Weber Fraction

A principle that quantifies the perception of change in a given stimulus according to the Just Noticeable Difference (JND).