Question

1. Dan Robertson is one of the owners of a firm which generated $25,000 in taxable income last year. Dan did not have to pay any personal tax on his share of the firm's income. Dan must be a partial owner of a:
   1. Sole proprietorship.
   2. General partnership.
   3. Limited partnership.
   4. Non-dividend paying corporation.
   5. Limited liability company.

Answer 1

Dan must be a partial owner of a Non-dividend paying corporation.

In case of a Sole proprietorship,General partnership,Limited partnership or Limited liability company, the income is reported in personal tax return of owners and owners have to pay personal tax on their share of the firm's income.

In case of a Corporation, the income is taxable in corporation's hands. The owners have to pay tax only on dividends received from corporation.

As Dan did not have to pay any personal tax on his share of the firm's income, it must be a corporation which has not paid any dividends during the year.

Option D is correct