Flycatcher Corporation, a C Corporation, Has Two Equal Individual Shareholders

Multiple Choice

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

A) Flycatcher cannot avoid the corporate tax altogether by paying out all $100,000 of net profit as dividends to the shareholders.
B) Nancy incurs income tax of $1,500 on her dividend income.
C) Pasqual incurs income tax of $1,500 on his dividend income.
D) Flycatcher pays corporate tax of $22,250.
E) None of the above.