Otis is the CEO of Rectify, Inc., a private foundation. Otis invests $500,000 (80%) of the foundation's investment portfolio in high-risk derivatives. Previously, the $500,000 had been invested in corporate bonds with an AA rating that earned 4% per annum. If the derivatives investment works as Otis's investment adviser claims, the annual earnings could be as high as 20%.

Compute the amount of the initial tax, if any.

1. The initial tax imposed on Rectify (if any) is $. The initial tax imposed on Otis (if any) is $

If the act causing the imposition of the tax is not addressed within the correction period, compute the additional tax, if any.

1. The additional tax for Rectify (if any) would be $. The additional tax for Otis (if any) would be $

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