ZZZ Corporation is a regular C-Corporation using a calendar tax-year. Michelle owns 25% (that's one-fourth) of ZZZ Corporation. The corporation reported $100,000 of taxable income on its Form 1120 for its most recent tax year. However, the corporation distributed only $28,000 of those profits to its shareholders. During the year, Michelle received $7,000 in dividends from the corporation (representing her share of the total dividends distributed to all shareholders). How much income must Michelle report on her Form 1040 Individual Income Tax Return for the year in question?
Multiple Choice
$7,000 (the dividends she received).
$25,000 (her share of the corporation's profits).
$32,000 (her share of both the dividends and the corporation's profits).
$0 (Michelle reports no taxable income resulting from this corporation because such a corporation is NOT a flow-through or conduit entity).