Lois and Clark are both single and neither one has any dependents. They are $50$ percent co$-$owners of a new business, and they are trying to decide whether to organize the business as a partnership or a C corporation. They know that one of the factors to consider is the tax impact of the organizational form. Compute the $2023$ income tax payable by Lois and Clark and by their business entity. Lois will receive an annual salary from the business of $$120,000.$ Clark will receive an annual salary of $$80,000.$ Their only other source of income is their share of business profit. Both use the standard deduction, which is $$13,850$ for a single individual in $2023.$

The business net income after salaries will pass through to Lois and Clark in equal amounts if their business is organized as a partnership. Remember to consider the Qualified Business Income Deduction $($section $199$A$)$ related to partnership income. The business is not involved in a service trade or business such as accounting, health, or law. None of the income qualifies as self$-$employment income. The W$-2$ wages of the business, paid to employees other than Lois and Clark, will be $$300,000.$ The unadjusted basis of the assets of the business, immediately after they were placed in service, is $$2,000,000.$

Put your answers to the following questions into the accompanying answer sheet. Note that the second tab of the answer sheet is a $2023$ individual tax calculator. For any taxable income entered in row $11$ of columns F through O$,$ the spreadsheet will return the income tax in row $12.$

$1.$ Compute the taxes payable by Lois and Clark assuming their business is a partnership that earns the following amounts of net income $($after their guaranteed payments of $$120,000$ and $$80,000).$ Then compute the tax payable by Lois, Clark, and the corporation assuming the same business income amounts $($after salaries$)$:

a$.$$$10,000.$

b$.$ $$0.$

c$.$ $$10,000.$

d$.$ $$500,000.$

e$.$ $$1,000,000.$

The computation should be of the $2023$ tax only. Ignore carryforwards or carrybacks to other years.

$2.$ Based on your findings, what do you recommend to Lois and Clark?