Action Sport is an S corporation owned equally by three shareholders. During the current year, Action Sport generated taxable income of $$60,000.$ What is the tax

treatment, if any, of the $$60,000$ income?

S corporations are tax$-$exempt entities, so there is no tax liability resulting from Action Sport's operations.

Each shareholder will report the portion of income that he or she receives in cash, and Action Sport will pay tax on the remaining income.

Each shareholder will report $$20,000$ in taxable income.

Action Sports will report and pay tax on $$60,000.$