Question

Which of the following characteristics is true regarding a pass through entity?

a. Income is not taxed at the entity level.

b. Income is taxed at both the entity level and individual level.

c. Income is not taxed unless distributions are made.

d. Income is taxed at the entity level and other items of loss, deduction, and credits are passed through to the individual owner level.

Answer 1

Answer:

Option A : Income is not taxed at the entity level.

Explanation:

Option A is correct because for a pass through entity Income is not taxed at the entity level, else it will be taxed at owner or infividual level.

Option B is incorrect because in a pass through entity Income is taxed only in the individual level.

Option C is incorrect because in a pass through entity income is taxed regardless of whether distributions are made or not .

Option D is incorrect because this statement is completely wrong, because all items are taxed at individual level.