During the Current Year, Trane Invests $35,000 in Each of Two

question 40

Multiple Choice

During the current year, Trane invests $35,000 in each of two separate corporations. Each investment gives him a 20% ownership interest. Brazil Corporation is a regular corporation that has taxable income of $200,000 and pays dividends totaling $50,000. China Corporation is an S corporation that has taxable income of $100,000 and pays $50,000 of dividends. As a result of these two investments, Trane
I.Has $40,000 of taxable income from Brazil Corporation.
II.Has $20,000 of taxable income from China Corporation.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, homogeneity of products, and easy entry and exit, leading to perfect competition.

Commodity Products

Products that are largely interchangeable with others of the same type because they have no significant differentiation.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace, determined by supply and demand dynamics.

Oligopolistic Market

A market structure characterized by a small number of large firms dominating the industry, with significant barriers to entry for new competitors.