PROBLEM Boots, Inc. in a "C" corporation engaged in the shoe manufacturieg business. Boots is a calendar year, accrual method taxpayer with two equal ahareholdere, Bmil and Betty, who are unrelated cash method trypayera. It answering the queations below, assume for convenience that Bmil and Betty each are taxable at a combined federal and state flat rate of 40% on ordethy capital gains. During the current year, Bcots has the following income nand expense items: (a) Determine Beots, Inci's taxable income and its tax liability for the current year. (b) What result in (a), above, if Boots distributes its after-tax profits to Emil and Betty as qualified dividend s? (c) What result in (a), above, if instead of paying dividends Boots pays Emil and Betty salaries of $500,000 each? Has the effectiveness of this traditional strategy to reduce the impact of the double tax on corporate earnings changed as a result of the 2017 Act? (d) Consider generally whether there is any advantage to operating Boots as a pass-through entity, such as a partnership, limited liability company, or S corporation and, if 80, whether Emil and Betty will qualify for the new 20% deduction for qualified business income. What additional facts: are necessary to evaluate this option? E. CORPORATE CLASSIFICATION 1. INGENERAL Code: $7701(a)(3) The classification of a business relationship may have profound tas consequences. Entities classified as C