Asked by mishayla zecco on Mar 10, 2024
Verified
Which statement is true regarding S corporations?
A) They are considered partnerships yet taxed like corporations as long as they follow regulations.
B) They cannot have more than 80 shareholders.
C) Shareholders do not report profit on their personal income tax forms.
D) They may be formed under state law.
E) Income is taxed only when distributed to the shareholders, who must not report the income on their personal income tax forms.
S Corporations
A unique status enabling small businesses to transfer corporate profits, losses, deductions, and tax credits directly to their shareholders for the purpose of federal taxation.
Shareholders
Persons or entities that hold ownership interest in a corporation through stock, participating in its profits and decisions.
Personal Income Tax
A tax levied by government on individuals or households based on their total yearly income from all sources.
- Grasp the distinct legal and tax features of S corporations.
Verified Answer
NR
Natalie RodriguezMar 10, 2024
Final Answer :
D
Explanation :
S corporations are indeed formed under state law, similar to C corporations and other business entities. They must adhere to the specific laws and regulations of the state in which they are incorporated.
Learning Objectives
- Grasp the distinct legal and tax features of S corporations.