Owl is a closely held corporation owned by eight shareholders (each has 12.5% of the stock). Selected financial information provided by Owl follows.
Taxable income ....................$6,250,000
Positive AMT adjustments (excluding ACE adjustment) .... 600,000
Negative AMT adjustments ................ (30,000)
Tax preferences .................... 5,000,000
Retained earnings ................... 900,000
Accumulated E & P ................... 2,000,000
ACE adjustment ..................... 750,000
a. Calculate Owl's regular Federal income tax liability and AMT if it is a C corporation.
b. Calculate Owl's regular Federal income tax liability and AMT if it is an S corporation.
c. How would your answers in (a) and (b) change if Owl was not closely held (e.g., 5,000 shareholders with no shareholder owning more than 2% of the stock)?