Federal taxation

S‑corporations report each shareholder’s share of taxable income, deductions, and credits on Schedule K‑1 (Form 1120‑S), which the shareholders then attach to their personal returns. The corporation does not issue W‑2s for its pass‑through profit, so answer A is incorrect; W‑2s report wages paid to employee‑shareholders only. Forms 1099‑DIV and 1040 alone do not capture the detailed allocation required.

To be a qualified dependent, the taxpayer must satisfy all five IRS tests—relationship, residency, age, support, and not filing a joint return—because each test ensures the dependent truly relies on the taxpayer. The notion that the dependent must be over 18 is incorrect; many qualifying children are younger, and age alone does not determine eligibility.

For the 2024 tax year, the IRS set the standard deduction for single filers at $14,600 to adjust for inflation. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.

• !Option C is incorrect because a $25,000 deduction is closer to the married filing jointly standard deduction, which is double the single filer amount.
• !Option A is incorrect because Form W-2 is used for employee wages, while Option C is incorrect because Form 1099-DIV is used to report corporate dividend distributions, not partnership allocations.
• !The corporation does not issue W‑2s for its pass‑through profit, so answer A is incorrect; W‑2s report wages paid to employee‑shareholders only.
• !The notion that the dependent must be over 18 is incorrect; many qualifying children are younger, and age alone does not determine eligibility.

Answer each from memory — you'll see instantly whether you're right and why.

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