Flycatcher Corporation,a C corporation,has two equal individual shareholders,Nancy and Pasqual.In the current year,Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder.Regardless of any tax consequences resulting from their interests in Flycatcher,Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket.With respect to the current year,which of the following statements is incorrect?
A)Flycatcher cannot avoid the corporate tax altogether by distributing all $100,000 of net profit as dividends to the shareholders.
B)Nancy incurs income tax of $1,500 on her dividend income.
C)Pasqual incurs income tax of $1,500 on his dividend income.
D)Flycatcher pays corporate tax of $22,250.
E)None of the above.

Question

Quizplus · Accepted Answer

Pasqual incurs income tax of $1,500 on his dividend income is incorrect because qualified dividends are taxed at a lower rate, typically 0% for those in the 15% marginal tax bracket.

Flycatcher Corporation,a C Corporation,has Two Equal Individual Shareholders,Nancy and Pasqual