3A.

Mr. and Mrs. Berry are equal partners in a family partnership. Mr. and Mrs. Berrys marginal tax rate is 35%. Next year, the partnership is expected to generate $600,000 of ordinary income. The Berrys are considering transferring 20% interests in the partnership to each of their two children. Their daughter, Straw, has a 12% marginal tax rate. Their son, Rasp, has a 22% marginal tax rate. Calculate the expected annual tax savings to the family from the proposed transfer of partnership interests.

3B. Coconut, an individual, is the sole shareholder of Tropical Fruit Corporation, a U.S. based corporation. Coconut also owns the office building that serves as corporate headquarters for Tropical Fruit Corporation. Last year, Tropical Fruit Corporation paid $1,100,000 annual rent to Coconut for use of the building. Tropical Fruit Corporation 's marginal tax rate was 21% and Coconut's marginal tax rate on ordinary income was 37%. Also, Coconuts qualified dividend rate was 20%. The revenue agent who audited Tropical Fruit Corporation's return concluded that the fair rental value of the office building was $825,000. Compute the decrease in Coconuts income tax liability as a result of this audit conclusion.

3C. Coconut, an individual, is the sole shareholder of Tropical Fruit Corporation, a U.S. based corporation. Coconut also owns the office building that serves as corporate headquarters for Tropical Fruit Corporation. Last year, Tropical Fruit Corporation paid $2,600,000 annual rent to Coconut for use of the building. Tropical Fruit Corporation 's marginal tax rate was 21% and Coconut's marginal tax rate on ordinary income was 37%. Also, Coconuts qualified dividend rate was 20%. The revenue agent who audited Tropical Fruit Corporation's return concluded that the fair rental value of the office building was $1,950,000. What is the net increased amount of Coconut and Tropical Fruit Corporation's combined income tax liability as a result of this audit conclusion?