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

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 distributing 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:

Type II Error

The failure to reject a false null hypothesis, commonly referred to as a "false negative" finding.

Sample Size

The number of observations or data points in a study or experiment.

Null Hypothesis

A statement that assumes no relationship or difference between certain variables.

Type I Error

Type I Error occurs when a true null hypothesis is incorrectly rejected, often symbolized as the false positive rate in hypothesis testing.