Ask Question
BusinessBusiness
20 October, 10:54

Jennifer owns 60% of the stock in Heath Corporation. During the current year, Heath Corporation has taxable income of $80,000 and pays dividends of $30,000. Which of the following statements about Jennifer's income from Heath Corporation is/are correct? I. If Heath Corporation is an S corporation, Jennifer must recognize $48,000 of income. II. If Heath Corporation is a corporation, Jennifer must recognize $18,000 of income. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.

+5
Answers (1)
  1. 20 October, 14:03
    0
    Option C Both statements are correct.

    Explanation:

    An S Corporation is not liable for taxes under US tax system, the taxable income of the company is included in the income of shareholders for the year. So if the company is S company then the share of taxable income attributable to Jennifer is 60% of the total Taxable Income which is $48,000 for the year. So the statement 1 is correct.

    If the company is taxed under US tax system which means it is C Corporation, then its taxable income will not be included in the income of its shareholders because it would be double taxed for the year. The only income that will be included in the shareholder's income will be the dividends that the shareholder will receive. So the taxable income for the year would be $18000 which is the dividend income for the year. So the statement 2 is also correct.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Jennifer owns 60% of the stock in Heath Corporation. During the current year, Heath Corporation has taxable income of $80,000 and pays ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Recent forest fires in the western states are expected to cause the price of lumber to rise in the next six months. as a result, we can expect the supply of lumber to
Answers (1)
Quiz 1. If you maintain a good driving record, your car insurance company may reward you with
Answers (1)
ExxonMobil reports total assets of $198 billion and total liabilities of $92 billion. Citigroup reports total liabilities of $1,350 billion and stockholders' equity of $95 billion. Amazon reports total assets of $3.
Answers (1)
What do you call an agreement made between different companies to charge the same amount for products?
Answers (1)
Which is a primary activity in Porter's value chain model? A. finance B. procurement C. human resources D. outbound logistics
Answers (1)
New Questions in Business
According to adam smith, competition fosters efficiency because
Answers (1)
Decisions by the coffee collective regarding which type of organic dog biscuit to offer is an example of which element of retail strategy?
Answers (1)
Abc company is hesitant about entering ukraine, because the country has been experiencing social unrest in recent years. Based on this information, what type of risk is abc company trying to avoid?
Answers (1)
When the price of flowers increased from $5.00 to $5.70, the quantity demanded of chocolate increased from 5,550 to 6,150. What is the estimated cross-price elasticity of demand for chocolate? Round your answer to the nearest hundredth.
Answers (1)
Assume the following information for Kingbird Corp. Accounts receivable (beginning balance) $139,000 Allowance for doubtful accounts (beginning balance) 11,370 Net credit sales 944,000 Collections 908,000 Write-offs of accounts receivable 5,300
Answers (1)
Home » Business » Jennifer owns 60% of the stock in Heath Corporation. During the current year, Heath Corporation has taxable income of $80,000 and pays dividends of $30,000.
Sign Up Forgot Password?