/takeAssignment/taker usignmentMain.do?inprogress-true ns 60% of the stock in a
ID: 2539393 • Letter: #
Question
/takeAssignment/taker usignmentMain.do?inprogress-true ns 60% of the stock in a C corporation that had a profit of $200,000 in the current year. Carlos owns a 60% interest in a partnership that had Juanita ow profit of $200,000 during the year. The corporation distributed $45,000 to Juanita, and the partnership d information, which of the following statements is incorrect? stributed $45,000 to Carlos, with respect to a. The corporation must pay corporate tax on $200,000 of income. Ob. The partnership is not subject to a Federal entity-level income tax. c. Carlos must report $120,000 of income from the partnership. Od. Juanita must report $120,000 of income from the corporation e. None of these choices are correct
Explanation / Answer
Ans (d)
Corporation is a legal entity separate from its owners. The C Corporation must pay taxes on its income and rest of the amount after taxes distribute as dividend. This dividend is also taxes in the hands of shareholders. So Junita must report $45000 received as dividend as income from Corporation.
A Partnership is not taxable entity as per federal law. There is no Partnership income tax as Corporation income tax.So it is correct
Income from partnership is taxed to the individual partners in their own income tax rates. So Carlos report $120000 income from partnership is correct.
Junita must report $120000 from Corporation is incorrect because its report $45000 as income from Corporation. Shareholder of C Corporation are required to report income from C corporation only to the extent of dividend received.
Ans (a) In 2018 if payment was made at any time during that year.
As per accrual method of accounting expense is booked on the date when it is accrued but in this case Charles a sole shareholder (it means more than 50% shares in the corporation), so Corporation must wait to deduct the amount of Bonus till it is booked by Charles in its gross income. Charles, who is the calendar year taxpayer, booked that income in the year it is actually received in cash from Peregrine’s Corporation. Therefore Peregrine’s pays the bonus at any time during 2018 so it can deduct the bonus in 2018.
Ans (d)
Corporation is a legal entity separate from its owners. The C Corporation must pay taxes on its income and rest of the amount after taxes distribute as dividend. This dividend is also taxes in the hands of shareholders. So Junita must report $45000 received as dividend as income from Corporation.
A Partnership is not taxable entity as per federal law. There is no Partnership income tax as Corporation income tax.So it is correct
Income from partnership is taxed to the individual partners in their own income tax rates. So Carlos report $120000 income from partnership is correct.
Junita must report $120000 from Corporation is incorrect because its report $45000 as income from Corporation. Shareholder of C Corporation are required to report income from C corporation only to the extent of dividend received.
Ans (a) In 2018 if payment was made at any time during that year.
As per accrual method of accounting expense is booked on the date when it is accrued but in this case Charles a sole shareholder (it means more than 50% shares in the corporation), so Corporation must wait to deduct the amount of Bonus till it is booked by Charles in its gross income. Charles, who is the calendar year taxpayer, booked that income in the year it is actually received in cash from Peregrine’s Corporation. Therefore Peregrine’s pays the bonus at any time during 2018 so it can deduct the bonus in 2018.
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