Which of the following statements regarding the tax burden imposed on business entities is true?
A) The tax burden imposed on corporate earnings is always lower if the corporation makes an S election.
B) Business owners desiring current cash flow can maximize annual after-tax cash flow by operating as a regular corporation.
C) Current tax cost associated with shareholder cash flow received as dividends may be lower than cash flow received as payments of salary, interest, or rental income.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

This statement is true because dividend income is generally taxed at a lower rate than other forms of income, such as salary or interest income. Option A is incorrect because the tax burden of an S-corporation may not always be lower, as it depends on the specific circumstances of the corporation and its owners. Option B is incorrect because regular corporations (C-corporations) are subject to double taxation, which can decrease after-tax cash flow.

Which of the Following Statements Regarding the Tax Burden Imposed