An S-corporation has a 100-percent owner. The S-corporation earns $200,000 before paying its owners wages of $100,000 plus $30,000 of health insurance benefits. Ignore social security taxes.

1. Prepare and attach page 1 of Form 1120S. Enter 200,000 for line 6. Carefully complete lines 7-21, as applicable. You may need to refer to the instructions. No additional forms are required.

2. Enter the S-Corporations ordinary business income (line 21)

3. When the S-Corporation files its Form 1120-S, it will pay no taxes. Explain why.

4. When the owner prepares his individual income tax return, is the $30,000 in health insurance benefits treated differently than if it was received from a regular employer or a C-Corp? Explain, and cite, reference, and attach your sources. You may wish to review the MC17 multiple-choice solutions and expanded explanations. Another resource is the IRS instructions to Form 1120 page 1.

5. Owner is single, has no other income, and does not itemize deductions. Calculate and show work for owners personal income taxes (ACCT 3101 is a pre-req for this course).

6. Prepare a table comparing the combined tax burden (owner plus Corp) for C-Corp versus S-Corp.