A business entity has four equal owners. Its taxable income before the cost of certain fringe benefits paid to owners and other employees is $400,000. The amounts paid for these fringe benefits are reported as follows.

a. Calculate the Federal taxable income of the entity, assuming that it is a(n):
€¢ Partnership.
€¢ C corporation.
€¢ S corporation.
b. Determine the Federal income effects on the owners, assuming the use of each of the three business forms.

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Owners $20,000 50,000 Other Employees $40,000 75,000 Group term life insurance Meals and lodging incurred for the convenience of the employer Qualified retirement plan 30,000 90,000