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Natasha owns a S corporation, and Adam is the sole shareholder of a C corporation. In...

Natasha owns a S corporation, and Adam is the sole shareholder of a C corporation. In the current year both businesses make a net profit of $60,000. Adam receives a dividend of $60,000 from the C corporation. For the current year, Natasha must report $60,000 of income on her individual tax return, but Adam is not required to report any income from the corporation on his individual tax return.

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Answer #1

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True.

Any Dividend received from a C Corporation in which shareholders owns more than 80% stock is eligible for 100% deduction on income. therefore Adam is not required to report any income from the corporation.

S Corporation are type of corporation in which income earned by S corporation is not taxed in the hands of Corporation but taxed in the hands of shareholders in the proportion of their holdings. So Natasha should report income of $60,000 earned by S corporation as she Owns 100% of S corporation.

So Correct Answer is True.

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