In the Current Year, Sole Proprietor Z (A Single Taxpayer)

In the current year, sole proprietor Z (a single taxpayer) incorporates his business and becomes the sole shareholder in Z Corporation.The business has consistently generated $70,000 annual income to Z.Which of the following statements concerning the newly formed C corporation is not accurate?

A) Z Corporation has a lower effective tax rate on the business income than did sole proprietor Z.
B) Z Corporation may pay Z a reasonable salary for services rendered to the corporation and deduct the payment.
C) Z Corporation may pay Z a competitive interest rate on funds lent by Z to the corporation and deduct the payments.
D) Z corporation's net income is nontaxable when distributed to its shareholder as dividends.