Question
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Totos average annual net
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Totos average annual net profit (before deduction of Mr. Lions salary) is $430,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.)
a. Mr. Lions salary is $100,000, and Toto pays no dividends.
b. Mr. Lions salary is $100,000, and Toto distributes its after-tax income as a dividend.
c. Toto is an S corporation. Mr. Lions salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
d. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
e. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Totos average annual net profit (before deduction of Mr. Lions salary) is $430,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.)
- Mr. Lions salary is $100,000, and Toto pays no dividends.
- Mr. Lions salary is $100,000, and Toto distributes its after-tax income as a dividend.
- Toto is an S corporation. Mr. Lions salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
- Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
- Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.
| a. income tax burden on this profit | |
| b.income tax burden on this profit | |
| c. income tax burden on this profit | |
| d. income tax burden on this profit | |
| e. income tax burden on this profit |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Strategies To Boost Businesses Step By Step Proven Business Strategies To Boost Businesses
Authors: John Baker
1st Edition
979-8856562124
