Question

an Robertson is one of the owners of a firm which generated $25,000 in taxable income last year. Dan did not have to pay any personal tax on his share of the firm's income. Dan must be a partial owner of a:

a. Sole proprietorship.

b. General partnership.

c. Limited partnership.

d. Non-dividend paying corporation.

e. Limited liability company.

Answer 1

D is the Answer- he must be the owner of a non dividend paying corporation

.A Sole proprietorship.   the profits generated by the a sole prproprietor from his business is taxable. moreover it says DAn is one of the owners. In Sole proprietorship. there cannot be more than 1 owner.

b. General partnership.   the profits generated by the General partnership. are taxable in the hands of the partners. The general Parnership is not TAxed according to laws, rather the Partenrs are taxed the federal income tax for their share of profits in the firm

c. Limited partnership. - As far as taxability is concerned there is no distinction between a general parnership and a limited partnership. Partners are liable for their share in profits of the firm

d. Non-dividend paying corporation- the profits of the corporation - if they are distributed - only then it will be an income in the hands of the owners. If no dividend is paid, dan wont be liable to income tax on it.

e. Limited liability company.- the profits earned by the limited company is taxable to income tax. however Dan's share of profits wont be directly taxed unless it is distributed to him in the form of dividends. Usully, a limited company distributes its profits as dividends and DAn will be taxable for such dividends.