Question

Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as___________.
a. a pass-through entity.
b. a natural person.
c. a tax-paying entity.
d. a partnership by estoppel.

Answer 1

A a pass through entity I hope it ok

Answer 2

Answer:

The correct answer is letter "A": a pass-through entity.

Explanation:

A pass-through entity is the type of business that passes income liabilities to its owners. It implies the institution's taxes are reported in the owners' tax return. Partnerships are the type of companies where owners share liabilities proportionally to their contribution to the partnership.

Therefore, Hollister and Gladys, who have a partnership in Frothy Confections, will have to report taxes of the business in their tax returns since Frothy Confections is considered a pass-through entity for federal income tax purposes.