Flycatcher Corporation,a C Corporation,has Two Equal Individual Shareholders,Nancy and Pasqual

question 55

Multiple Choice

Flycatcher Corporation,a C corporation,has two equal individual shareholders,Nancy and Pasqual.In the current year,Flycatcher earned $200,000 net profit and paid a dividend of $40,000 to each shareholder.Regardless of any tax consequences resulting from their interests in Flycatcher,Nancy is in the 28% marginal tax bracket and Pasqual is in the 35% marginal tax bracket.With respect to the current year,which of the following statements is incorrect?

• A)Flycatcher pays corporate tax on $200,000.
• B)Nancy incurs income tax of $6,000 on her dividend income.
• C)Pasqual incurs income tax of $6,000 on his dividend income.
• D)Flycatcher can avoid the corporate tax altogether by paying out all $200,000 of net profit as dividends to the shareholders.
• E)None of the above.

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Definitions:

Technological Dependency

Reliance on technology to perform daily activities or business operations, which can increase vulnerability to technological failures or cyber threats.

Investment Account

An account held at a financial institution or brokerage that is used to hold securities, stocks, bonds, and other investments.

Dividend Receivable

The amount of declared dividends owed to shareholders but not yet paid out by the company.

Equity in Investee Income

The portion of income attributed to a parent company from its investment in another company, based on the parent's ownership percentage.