Which of the following is true of taxes on amounts withdrawn from a business?
A) Salaries and bonuses received from the business corporation are not considered as expenses to the business.
B) When one withdraws cash from a proprietorship or partnership, these sums are also taxable to that person as an individual.
C) When owners receive a dividend from a corporation, it is taxed only once.
D) The payment of pension plans is not deductible by the business.

Question

Quizplus · Accepted Answer

When an individual withdraws cash from a proprietorship or partnership, he/she is subject to tax on that amount as an individual because these types of businesses are considered "pass-through entities" where profits and losses flow through to the owners' personal tax returns. Option A is incorrect because salaries and bonuses paid to employees are considered as expenses to the business and are deductible. Option C is incorrect because dividends are taxed twice - once at the corporate level and again at the individual level when received by the shareholder. Option D is incorrect because pension plan contributions are deductible by the business.

Which of the Following Is True of Taxes on Amounts