Page 4 of 6 Section A: Tax Case Studies Case study (1) (10 Marks) For the current year, Creative Designs Inc., a C corporation paying salary to Ben the sole shareholder of Creative Designs Inc. (CD). Bens mai reports taxable income of $300,000 before and 15 percent on dividend income. Assume CD's tax rate is 39 percent. Creative Designs and Ben pay on the $300,000 taxable income ordinary income is 28 percent a) How much total income tax will for the year if C income to Ben as a dividend? How much total income tax will Creative CD pays Ben a salary of $100,000 and distributes its doesn't pay any salary to Ben and instead distributes all of its after-tax Designs and Ben pay on the $300,000 of income if Ben as a b) remaining after-tax earnings to dividend? ompare your answer in part a. with your answer to part b. Explain why these numbers are different Case study (2) (10 Marks) In its first year of existence Aspen Corp. (a C corporation) reported a loss for tax purposes of $50.000. In year 2, it reports a $30,000 loss. For year 3, it reports taxable income from operations of $120,000. How much tax will Aspen Corp. pay for year 3 after the carry forward is applied? Consult the corporate tax rate table provided to calculate your answer. (Use Corporate Tax Rate Schedule.) Case study (3) (30 Marks) Solve each of the following independent cases: Smith operates a roof repair business. This year Smith's business generated cash receipts of $32.000 and Smith made the following expenditures associated with his business: I) Advertising Car and truck expenses Depreciation S 500 1,360 3,200 5,000 1,000 Education two-week, nighttime course in business management. Smith believes eexpendliture should qualify as an ordinary and necessary business expense. What net income should The education expense was for a h report from his business? Smith is on the cash method and calendar year Bryon operates a consulting business and he usually works alone. However, during the summer 2) will sometimes hire undergraduate students to collect data for his projects. This past summer Bryon hired Fred, the son of a prominent businessman, for a part-time summer job. Ihe summer job usually pays about $17.000, but Bryon paid Fred $27,000 to gain favor with Fred 's father. What amount of Fred's summer wages can Bryon deduct for tax purposes? Bry is on the cash method and calendar year