Juanita owns 45% of the stock in a C corporation that had a profit of $120,000 in 2011. Carlos owns a 45% interest in a partnership that had a profit of $120,000 during the year. The corporation distributed $20,000 to Juanita, and the partnership distributed $20,000 to Carlos. Which of the following statements relating to 2011 is incorrect?
A) Juanita must report $20,000 of income from the corporation.
B) The corporation must pay corporate tax on $120,000 of income.
C) Carlos must report $20,000 of income from the partnership.
D) The partnership is not subject to a Federal entity-level income tax.
E) None of the above.

Question

Quizplus · Accepted Answer

Carlos must report his share of the partnership's profit, which is 45% of $120,000, not just the $20,000 distributed to him.

Juanita Owns 45% of the Stock in a C Corporation