Tom owns 40% of Thompson Corporation (a C corporation). During 2016, Thompson Corporation had $1,000,000 in gross income, deductible business expenses of $600,000 and a business tax credit of $36,000. Thompson paid paid a total of $200,000 in qualified dividends to its shareholders. Tom is single, has modified adjusted gross income of $450,000, and is in the 39.6% marginal tax bracket. What amount of federal income tax must must Thompson Corporation and Tom pay in 2016 as a result of Thompson Corporations 2016 business operations as a C Corporation?

Thompson Corporation Tom

A. $340,000. 79,200

B. $204,000. 40,000

C. $136,000. 34,720

D. $100,000. 19,040

E. $87,760. 16,000

In 2015, Ian paid $9,000 for 25% of the stock of an S corporation. On its federal income tax return for 2015, the S corporation reported a loss of $42,000 and made no distributions to its shareholders. On its 2016 federal income tax return, the S corporation reported taxable income of $54,000 and paid distributions to its shareholders totaling $20,000. Ian is in the 28% federal marginal tax bracket for 2015 and 2016. How much income tax (if any) did Ian save in 2015 as a result of the S corporations operations and how much federal income tax must Ian pay (if any) as a result of the S corporations operations in 2016?

Federal tax savings in 2015 Federal tax paid in 2016

A. $0 750

B. $0 1,400

C. $2,520 3,360

D. $2,520 1,800

E. $2,940 3,780