Question
Turtle, a C Corporation, has taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania, and Alan. Turtle follows a policy
Turtle, a C Corporation, has taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania, and Alan. Turtle follows a policy of distributing all after-tax earnings to shareholders. a. Determine the tax consequences for Turtle, Britney, Shania, and Alan if the corporation pays salaries to Britney, Shania and Alan as follows: Option 1- Britney $135,000, Shania $90,000, Alan $75,000 Option 2- Britney $67,500, Shania $45,000, Alan $37,500 b. Is Turtle likely to encounter any tax problems associated with either option? Explain.
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