Francisco Is the Sole Owner of Rose Company

Multiple Choice

Francisco is the sole owner of Rose Company. For 2011, the only income of Rose was a long-term capital gain of $25,000. The business made no distributions during the year to Francisco. Irrespective of Rose Company, Francisco's marginal tax rate is 35% and he has no capital asset transactions. Which of the following statements is incorrect?

A) If Rose Company is a sole proprietorship or S corporation, Francisco must report the $25,000 long-term capital gain on his personal income tax return.
B) If Rose Company is a C corporation, Francisco will report none of the $25,000 long-term capital gain on his personal income tax return.
C) If Rose Company is a sole proprietorship or S corporation, a preferential tax rate applies to the $25,000 long-term capital gain.
D) If Rose Company is a C corporation, a preferential tax rate does not apply to the $25,000 long-term capital gain.
E) None of the above.