12 Paragraph 12 Styles Please use the following information to answer questions 2-3. ABCL Corp. is a private, incorporated business that operates three bed and breakfast inns in the Niagara-on-the-Lake area. Pavel is the principal shareholder in ABCL. He has two managers that look after the three inns, Bronson and Nigel. Pavel wants to obtain "key person" insurance on Bronson and Nigel as they are critical to the successful operation of ABCL. Pavel's financial advisor, Stuart, tells Pavel that it would be "cheaper" for ABCL, rather than the key employees, to own and pay for the insurance policies. Pavel seeks greater clarification. 2. Which of the following is correct? 1 it would be cheaper for ABCL to own and pay for the insurance policies because the corporate earnings in a small business corporation like ABCL are sheltered from tax, therefore the funds required to pay the insurance premiums could come out of completely tax-free corporate earnings. 2 It would be cheaper for ABCL to own and pay for the insurance policies because the company can deduct the premiums paid as a business expense, while the individuals would have to pay the premiums with after-tax dollars. 3 It would be cheaper for ABCL to own and pay for the insurance policies because a portion of corporate earnings in a small business corporation like ABCL are only taxed at around the 20% marginal rate, therefore lesser pre-tax corporate earnings would be required to generate the necessary after-tax funds to pay the insurance premiums. (A) 1 only. (B) 2 and 3 only. (C) 1 and 2 only (D) 3 only. h (United States)