Charleston Corporation (CC)now Operates as a "Regular" Corporation,but It Is

question 37

Multiple Choice

Charleston Corporation (CC) now operates as a "regular" corporation,but it is considering a switch to S Corporation status.CC is owned by 100 stockholders who each hold 1% of the stock,and each faces a personal tax rate of 35%.The firm earns $3,700,000 per year before taxes,and since it has no need for retained earnings,it pays out all of its earnings as dividends.Assume that the corporate tax rate is 34% and the personal tax rate is 35%.How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status?

• A) $10,139
• B) $7,605
• C) $8,177
• D) $8,749
• E) $6,787

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