Question

please answer whether the following are true or false

TRUE OR FALSE A TRUE B- FALSE 1. Given two possible legal ways of doing a business transaction, one is legally obligated to do the deal in the way that results in the higher income tax. 2. The 100% owner of a Limited Liability Company is personally liable for all debts of the LLC 3. A "C" corporation is allowed an "ordinary and necessary" deduction for dividends paid to shareholders. 4. In many situations, a "C" corporation receiving a dividend from another "C" corporation may deduct 50% of the dividends received from taxable income. 5. A "C" corporation must use December 31 for its year-end for income tax reporting

Answer 1

1. B - FALSE. Reason: Tax planning is legal. Thus, no one is legally obligated to do any deal which results in higher income tax. One can avoid tax by doing tax planning by means within the law.

2. B - FALSE - Under the LLC structure, owner is not personally liable for the debts. Liability will be limited to the LLC's assets and capital of owner.

3. B - FALSE - Dividend paid to shareholders are not allowed as ordinary and necessary deduction.

4. A - TRUE - A "C" corporation receiving dividend from another "C" corporation is allowed to deduct 50% of the dividend received from taxable income.

5. B - FALSE - It is not mandatory to use December 31 for its year end for income tax reporting. "C" corporation can also use other fiscal year that ends for example on June 30, you should file your tax returns by the fifteenth day of the third month after your tax year ends.