Joshua would like to organize Tumbler Systems (a business entity) as either an S corporation or as a corporation (taxed as a C corporation) generating a 12 percent annual before-tax return on a $504,000 investment. Joshuas marginal tax rate is 24 percent and the corporate tax rate is 21 percent. Joshuas marginal tax rate on individual capital gains and dividends is 15 percent. Tumbler Systems will pay out its after-tax earnings every year to either its members or its shareholders. If Tumbler Systems is taxed as an S corporation, Joshuas business income allocation would be subject to a 3.8 percent net investment income tax (he is a passive investor in the business), and the business income allocation would qualify for the deduction for qualified business income. (Round your intermediate calculations and final answer to whole number dollar amount.) Complete the following table (also posted in Canvas as an Excel Template) to determine: a. How much would Joshua keep after taxes if Tumbler Systems is organized as either an S corporation or a C corporation? b. What are the overall tax rates (combined owner and entity level) if Tumbler Systems is organized as either an S corporation or a C corporation?

\begin{tabular}{|l|l|l|} \cline { 2 - 3 } a. & S corporation & Description of Work for Partial Credit \\ \hline \begin{tabular}{l} (1) Pretax \\ earnings \end{tabular} & & \\ \hline \begin{tabular}{l} (2) Entity- \\ level tax \\ rate \end{tabular} & & \\ \hline \begin{tabular}{l} (3) Entity- \\ level tax \end{tabular} & & \\ \hline \begin{tabular}{l} (4) \\ Earnings \\ after entity- \\ level tax \end{tabular} & & \\ \hline \begin{tabular}{l} (5) QBI \\ deduction \end{tabular} & & \\ \hline \begin{tabular}{l} (6) Net \\ income \\ taxable to \\ owner \end{tabular} & & \\ \hline \begin{tabular}{l} (7) Owner- \\ level \\ marginal \\ tax rate \end{tabular} & & \\ \hline (8) Owner- & & \\ level tax & & \\ \hline After-tax & & \\ cash flow & & \\ \hline \end{tabular} \begin{tabular}{|l|l|} \hline C corporation & Description of Work for Partial Credit \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \cline { 2 - 3 } b. & S corporation & Description of Work for Partial Credit \\ \hline \begin{tabular}{l} Overall tax \\ rate \end{tabular} & & \\ \hline \end{tabular} \begin{tabular}{|l|l|} \hline C corporation & Description of Work for Partial Credit \\ \hline & \\ \hline \end{tabular}