Luis Is the Sole Shareholder of a C Corporation, and Eduardo

Multiple Choice

Luis is the sole shareholder of a C corporation, and Eduardo owns a sole proprietorship. Both businesses were started in 2011, and each business has a long-term capital gain of $20,000 for the year. Neither business made any distributions during the year. With respect to this information, which of the following statements is incorrect?

A) Eduardo must report a $20,000 long-term capital gain on his 2011 tax return.
B) Louis's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain.
C) Luis must report a $20,000 long-term capital gain on his 2011 tax return.
D) Eduardo receives a preferential tax rate on a long-term capital gain of $20,000.
E) None of the above.