Luis is the sole shareholder of Stork,Inc.,a C corporation,and Eduardo owns a sole proprietorship. Both businesses were started in 2008 and make a profit of $80,000 this year.Each owner withdraws $50,000 from his business during the year. Which of the following statements relating to 2008 is incorrect?
A)Eduardo must report $80,000 of net profit on his individual return.
B)Luis must report dividend income of $80,000.
C)Eduardo's proprietorship is not subject to an entity (separate) level income tax.
D)Stork Corporation must pay tax on $80,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Luis must report dividend income of $50,000,and Stork must pay tax on $80,000. Eduardo must report net profit from his business of $80,000,but the proprietorship is not a taxable entity. Luis is not required to report income from the Stork until he receives a dividend.

Luis Is the Sole Shareholder of Stork,Inc