Final answer:
Operating income from flow-through entities is taxed as ordinary income to the taxpayer-owners of the entities. Operating losses from flow-through entities are deductible in the current year. Operating losses are treated as ordinary losses for taxpayers to the extent they are deductible.
Step-by-step explanation:
The correct statement regarding flow-through entities is (a) Operating income from flow-through entities is taxed as ordinary income to the taxpayer-owners of the entities.
Flow-through entities, such as partnerships and S corporations, do not pay taxes at the entity level. Instead, the income or losses flow through to the individual owners or shareholders who report it on their personal tax returns. The income is then taxed at the individual's ordinary income tax rate. Therefore, statement (a) is correct.
Statements (b), (c), and (d) are incorrect. Operating income from flow-through entities may or may not be taxable in the current year, depending on certain limits imposed on the taxpayer (statement (b)). Operating losses from flow-through entities are deductible in the current year (statement (d)). Operating losses are treated as ordinary losses for taxpayers to the extent they are deductible (statement (c)).