Which of the following statements is CORRECT?
A)The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes.Thus, the federal government receives no tax revenue from these businesses.
B)All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code.
C)Small businesses that qualify under the Tax Code can elect not to pay corporate taxes, but then their owners must report their pro rata shares of the firm's income as personal income and pay taxes on that income.
D)Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes.Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the income and stockholders were taxed again on the income when it was paid to them as dividends.
E)All corporations other than non-profit corporations are subject to corporate income taxes, which are 15% for the lowest amounts of income and 35% for the highest amounts of income.

Question

Quizplus · Accepted Answer

This statement correctly describes the option for small businesses to elect not to pay corporate taxes, but instead have their owners report income on their personal tax returns. This is known as pass-through taxation, where the income passes through to the owners rather than being taxed at the corporate level. Options A, B, D, and E are all incorrect statements.

Which of the Following Statements Is CORRECT