Question

Which of the following statements is true?

a. distributions of c corporation income are not taxable
b. shareholders in a c corporation can use c corporation losses to offset shareholder income from other sources
c. C corporation shareholders are taxed based on their proportionate share of income
d. C corporation losses remain in the corporation and can offset capital gain income from other years

Answer 1

The correct statement is c. C corporation shareholders are taxed based on their proportionate share of income.

Step-by-step explanation:

The correct statement is c. C corporation shareholders are taxed based on their proportionate share of income.

When a corporation earns income, it is first taxed at the corporate level through corporate income tax. Then, when the profits are distributed to shareholders as dividends, the shareholders are taxed on their proportionate share of the income based on their ownership percentage.

For example, if a shareholder owns 30% of the company's stock, they will be taxed on 30% of the distributed income.