Lauren owns 100% of Hill Company, a manufacturing business. Hill Company has $525,000 in net income before deducting any compensation or other payment to Lauren. Lauren is a single taxpayer, claims the standard deduction for 2023 and Hill Company is her only source of income. As a sole proprietorship, Hill Company\'s income is eligible for the qualified business income deduction. Determine the total tax liability (Hill Company\'s plus Lauren\'s tax liability) for the three situations below for 2023. Ignore the tax consequences of the Social Security and Medicare taxes, the Additional Medicare Tax and the 3.8% Tax on Net Investment Income.

a. Hill Company is a sole proprietorship and Lauren withdraws $210,000 during the year. b. Hill Company is an S corporation and pays Lauren a salary of $210,000 during the year. c. Hill Company is C corporation. The corporation pays Lauren a salary of $210,000 and distributes all its after-tax income as a dividend.

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To determine the total tax liability for the three situations we need to calculate both Hill Companys tax liability and Laurens tax liability separate... View the full answer