Taxation of Business EntitiesCengageNOWv2 Chapter 3Q1

Discussion Question 3-1 (LO. 1) Janice is the sole owner of Catbird Company. In the current year, Catbird had operating income of $100,000, a long-term capital gain of $15,000, and a charitable contribution of $5,000. Janice withdrew $70,000 of profit from Catbird. Noting the tax entity type cited and regarding how Janice will report this information on her individual tax return, label each statement listed as being either "True" or "False". Feedback Check My Work Correcta.Assume Catbird is an LLC. •Janice will report the $15,000 long-term capital gain on Schedule D.  ✔ •Janice will report nothing as a single-member LLC, by default, is taxed as a corporation.  ✔ •Janice will report $100,000 operating income on Schedule C.  ✔ •Janice's $70,000 withdrawal have no effect on her individual tax return.  ✔ • Janice may claim a deduction for qualified business income of $20,000.  ✔ Feedback Check My Work Business operations can be conducted in a number of different forms. Among the various possibilities are the following: Sole proprietorships; Partnerships; Trusts and estates; S corporations; Regular corporations and Limited liability companies. For Federal income tax purposes, the distinctions among these forms of business organization are very important. True False True TrueTrueb.Assume Catbird Company is an S corporation. •As a tax reporting entity, Catbird will report and then pass through everything to Janice.  ✔ •Janice would claim a deduction for qualified business income of $20,000.  ✔ •Janice will report $100,000 of operating income on Schedule E.  ✔ • If Janice does not itemize, the $5,000 charitable contribution may be reported on Schedule E.  ✔ Feedback Check My Work Correct TrueTrue True Falsec.Assume Catbird is a C corporation and it has sufficient E & P. • Catbird Company will report taxable income of $40,000 on Form 1065. ✔ • If Catbird disbursed $70,000 to Janice, Janice would report it on her tax return. ✔ •Catbird Company will report taxable income of $110,000 on Form 1120. ✔ • Catbird is a separate taxable entity. Except for any dividends, Janice will report nothing on her individual return.