A business generates profit of $100,000. The owner has a 37% marginal tax rate. What amount of corporate and individual income tax will be paid on this profit if the business is an S corporation and no income is distributed?
A) Corporate tax, $21,000; individual tax, $37,000
B) Corporate tax, $21,000; individual tax, $0
C) Corporate tax, $0; individual tax, $37,000
D) Corporate tax, $21,000; individual tax, $15,800

Question

Quizplus · Accepted Answer

S corporations are pass-through entities, meaning the income is passed through to the owners and taxed at their individual tax rates. There is no corporate tax, so the individual tax on $100,000 at a 37% rate would be $37,000.

A Business Generates Profit of $100,000