Which of the following is true regarding the concerns of Jack and Bobby regarding double taxation and Mona's suggestion regarding an S corporation?
A) Mona's suggestion will not solve the issue of double taxation because with both a regular corporation and with an S corporation, the corporation is taxed on income and shareholders are taxed again on dividends they receive.
B) Jack and Bobby are incorrect, and an S corporation is not needed for any double taxation issue because with both a general corporation and an S corporation, tax effects would be the same with the corporation being taxed on earnings and shareholders being taxed again on dividends.
C) Mona is correct that S corporation shareholders report their income from the corporation only once, as personal income.
D) Mona is correct in that double taxation may be avoided through the use of an S corporation, but this can be negated through taxation of dividends at the higher corporate rate regardless of the tax rate of the shareholder.
E) Mona is correct that double taxation may be avoided through the use of an S corporation, but this may be negated by the fact that S corporations are taxed at a rate double that of general corporations.
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