Joe Crum is a restaurant consultant and also owns two restaurants. His corporate structure and activities are outlined below.

Crum Restaurants Ltd.

•   Owned 100% by Crum.

•   Owns and operates Crum Slow Foods.

•   Provides consulting services to a large number of small restaurants.

•   Provides managerial and administrative services to Hamburger Joint Ltd., a company owned 15% by Joe Crum.

•   20X1 income is as follows:

Consulting services………………                       $ 10,000

Managerial services (Hamburger Ltd.)            35,000

Crum Slow Foods ……………………………             60,000

………………………………………………                    $105,000

Pecky’s Restaurant Ltd.

•   Owned 100% by Crum Restaurants Ltd.

•   Owns and operates Pecky’s Coffee Shop.

•   20X1 income is $440,000.

Real Co. Ltd.

•   Owned 51% by Crum and 49% by his wife.

•   Owns several commercial and residential real estate properties, including the building occupied by Pecky’s.

•   20X1 income is as follows:

Rents:
Outside parties ………………………	$40,000
Pecky’s Coffee Shop………………………	50,000
…………………………………………………….	$90,000

Required:

1. Diagram the organization structure of Crum’s financial activities.

2. Describe the type of income each entity earns, and explain the related tax treatment.

3. Identify any problems that the existing structure may present, and suggest changes that you feel would be appropriate. If you are suggesting structural changes, briefly explain how they would be accomplished.