During the current year, David invests $35,000 in each of two separate corporations. Each investment gives him a 20% ownership interest. Corporation X is a C corporation that has a taxable income of $200,000 and pays dividends of $50,000. Corporation Z is an S corporation that has a qualified business income of $100,000 and pays $50,000 of dividends. As a result of these two investments, David:

1. has $10,000 of taxable income from Corporation X.
2. has $10,000 of taxable income from Corporation Z.

Neither statement is correct.

Only statement 1 is correct.

Both statements are correct.

Only statement 2 is correct.

Shasta has the following capital gains and losses and Qualified dividend income during the current year:

Shasta's Income Information

Short-term capital loss	$(4,000)
Collectibles gain	6,000
Long-term capital gain	2,000
Qualified dividend income	3,000

If Shasta's marginal tax rate is 32%, what is the effect of the gains, losses, and incomes given above on her taxable income and income tax liability?

Income / Tax Liability

$7,000 increase / $1,050 increase

$9,000 increase / $2,880 increase

$8,000 increase / $2,560 increase

$7,000 increase / $2,240 increase

$7,000 increase / $1,310 increase