Question

In 2020, Soup Corporation, a C corporation, has earnings of $100,000. It paid $20,000 in dividends to its sole shareholder, Grace. Grace also has a restaurant, Sandwich Café, which she operates as a sole proprietorship in 2020 with income of $125,000 and expenses of $50,000. What is the total income that she will report in her personal return from both Soup and Sandwich?

Question 10 options:

	$35,000
	$95,000
	$115,000
	$175,000

Answer 1

Any Dividend received from the C corporation is taxed in the hands of Share holders. The incomr from the sole proprietorship is taxable after deducting its expenses.

Given, Grace is a share holder of Soup Corporation and earns $20,000 as dividend which is taxable

Grace is also a Sole Proprietor who has an income of $125,000 and expenses of $50,000.

The taxable income of Grace from Sole proprietorship is $125,000 - $50,000 = $95,000

Total Taxable income of Grace from C Corporation and sole proprietorship is $20,000 + $95,000 = $115,000

Hence, the total income she will report in her personal return from both Soup and sandwich is $115,000

So, Option $115,000 is correct

From the above calcualtions it is cearly known that the rest of the options are incorrect.