Duet Co.is a calendar year S Corporation owned equally by Patricia and Scott.Duet Co.had taxable income of $40,000 for the current year.Patricia and Scott each received distributions from Duet Co.of $5,000.What is Patricia's taxable income from Duet Co.for the current year?
A)0
B)$5,000
C)$20,000
D)$25,000

Question

Quizplus · Accepted Answer

Patricia's taxable income from Duet Co. for the current year is $20,000. This is because S Corporations pass their income, deductions, and credits through to their shareholders for federal tax purposes. The $40,000 of taxable income is divided equally between Patricia and Scott, as they are equal owners, resulting in $20,000 of taxable income for each, regardless of the distribution amount they received.

Duet CoIs a Calendar Year S Corporation Owned Equally by Patricia