$.$ Amy is evaluating the cash flow consequences of organizing her business entity SHO as an LLC $($taxed as a sole proprietorship$),$ an S

corporation, or a C corporation. She used the following assumptions to make her calculations:

a$)$ For all entity types, the business reports $$22,000$ of business income before deducting compensation paid to Amy and payroll taxes

SHO pays on Amy's behalf.

b$)$ All entities use the cash method of accounting.

c$)$ If Amy organizes SHO as an S corporation or a C corporation, SHO will pay Amy a $$5,000$ annual salary $($assume the salary is

reasonable for purposes of this problem$).$ For both the S and C corporations, Amy will pay $7\mathrm{.}65$ percent FICA tax on her salary and

SHO will also pay $7\mathrm{.}65$ percent FICA tax on Amy's salary $($the FICA tax paid by the entity is deductible by the entity$).$

d$)$ Amy's marginal ordinary income tax rate is $35$ percent, and her income tax rate on qualified dividends and net capital gains is $15$

percent.

e$)$ Amy's marginal self$-$employment tax rate is $15\mathrm{.}3$ percent.

f$)$ Amy pays a $9$ percent additional Medicare tax on salary and net earnings from self$-$employment $($i$.$e$.,$ her salary and net earnings

from self$-$employment are over the threshold for the tax$).$

g$)$ Amy pays a $3\mathrm{.}8$ percent net investment income tax on dividends and net capital gains $($i$.$e$.,$ AGI on her joint tax return is over the

threshold by more than any net investment income she receives$).$

h$)$ Assume that for purposes of the qualified business income deduction, the business income is not from a specified service and

neither the wage$-$based limitation nor the taxable income limitation applies to limit the deduction.

i$)$ If SHO is formed as an S corporation or a C corporation, SHO will distribute all of its earnings after paying entity level taxes and

after deducting salary and related FICA taxes paid to Amy.

$****$Check photo for questions$***$