Manuel and Fernando own and operate an electronics store, Electronica, as an S corporation. Manuel owns 70%, and Fernando owns 30%. For the current year, the store reports the following:

Sales revenue ....... $1,000,000

Long-term capital gains ...... 8,000

Business expenses ....... (840,000)

Charitable contributions ..... (9,000)

Non-deductible expenses ..... (4,000)

Short-term capital losses .... (15,000)

Operating income ...... $ 140,000

a. Howmust Electronica report its results to Manuel and Fernando for tax purposes?

b. In addition to the income and deductions from Electronica, Manuel has interest and dividend income of $3,500, long-term capital gains of $1,500, and other itemized deductions of $14,500. He is married and has two children. What is his taxable income and his income tax liability?