Question

6.Yan and Joel form a corporation, but do not elect to make it a Subchapter S corporation.Each of them owns 50% of the stock. After their first year of doing business, thecorporation has made a profit of $50,000. Yan and Joel set aside $15,000 for a cashreserve, and split the remaining $35,000 equally. Which of the following best describesthe income tax liabilities from this situation?a.The corporation will pay taxes on the $50,000 profits, but Yan and Joel will nothave to pay taxes on their shares.b.Yan and Joel will each have to pay taxes on $25,000, one-half of the profits.c.Yan and Joel will each have to pay taxes on the $17,500 they each received, andthe corporation will have to pay taxes on the remaining $15,000.d.The corporation will pay taxes on the $50,000 in profits, and Yan and Joel willhave to pay taxes on the $17,500 they each received.

Answer 1

The option that would tell us the the income tax liabilities from this situation is that : The corporation will pay taxes on the $50,000 in profits, and Yan and Joel will have to pay taxes on the $17,500 they each received. Option D

What is meant by income tax liabilities?

A tax liability is the sum of money that a person, company, or other entity owes to a federal, state, or municipal taxing body. In general, you owe taxes when you earn money or make gains off of the sale of an investment or other item.

In journal entries, businesses deduct income tax expense and credit income tax payable. The completed journal entries include an equal debit and credit to income tax expense and income tax payment, respectively, if businesses utilize the same cash method of accounting for both financial and tax reporting.

Your tax obligation is determined by your taxable income after deductions and tax credits, not your gross income. Line 37 shows your federal tax liability for the current year.

Read more on income tax liabilities here:brainly.com/question/7409145

#SPJ1