Delane transfers $650,000 in cash to newly formed Watson Corporation for 100% of Watson's stock. In the first year of operations, Watson's taxable income before any payments to Delane is $170,000. Read the requirements. What total amount of taxable income must Delane and Watson each report in the following scenario? Requirement a. Watson pays a $25,000 dividend to Delane. Delane reports taxable income of $ 25,000 Watson Corporation reports taxable income of $170,000 Requirement b. Assume that when Watson was formed, Delane transferred his $650,000 to the corporation for $200,000 of Watson stock and $450,000 in Watson notes. The notes are repayable in four annual installments of $112,500 plus 15% annual interest on the unpaid balance. During the current year, Watson gives Delane $112,500 in repayment of the first note plus $67,500 interest. Delane reports taxable income of $ 67,500 Watson Corporation reports taxable income of