Elena owns 40% of Martinez, Inc., a regular C corporation, that reported net income of $80,000 for the year.During the year $8,000 was distributed to Elena from the corporation's earnings and profits.How much income from the corporation should Elena include in her gross income for the year?
A)$40,000
B)$32,000
C)$8,000
D)$3,200

Question

Quizplus · Accepted Answer

Elena should include $8,000 in her gross income for the year, which is the amount actually distributed to her from the corporation's earnings and profits. The percentage of ownership or the corporation's total net income does not directly affect the amount she must include in her gross income; only the distributions she actually receives are taxable to her as dividend income.

Elena Owns 40% of Martinez, Inc