Question

The income generated by S-Corporations:

Select one:
a. Passes through to its owners, and each is taxed individually for this income.
b. Is provided to non-profit organizations, so it is considered a tax-free source of funds.
c. Is taxed separately from its owners.
d. Must be reinvested in the business. Owners should not expect dividends.

Answer 1

The income generated by S-Corporations passes through to its owners, and each is taxed individually for this income.

Step-by-step explanation:

The income generated by S-Corporations passes through to its owners, and each is taxed individually for this income. This means that the income is not taxed separately from its owners, but rather, the owners are taxed on their share of the income.

For example, if there are three owners in an S-Corporation and the corporation earns $100,000 in profit, each owner would be taxed on their respective share of the $100,000. If each owner has a 33.3% share, they would be taxed on $33,333.33 each.

Therefore, option a: Passes through to its owners, and each is taxed individually for this income, is the correct answer.