While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat $($GTE$),$ specializes in custom$-$sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of $2022,$ and each contributed $$110,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$440,000$ from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's $2022$ activities:

GTE uses the cash method of accounting $($for both book and tax purposes$)$ and reports income on a calendar$-$year basis.

GTE received $$750,000$ of sales revenue and reported $$350,000$ of cost of goods sold $($it did not have any ending inventory$).$

GTE paid $$60,000$ compensation to James, $$60,000$ compensation to Paul, and $$70,000$ of compensation to other employees $($assume these amounts include applicable payroll taxes, if any$).$

GTE paid $$21,000$ of rent for a building and equipment, $$26,000$ for advertising, $$30,800$ in interest expense, $$4,600$ for utilities, and $$2,600$ for supplies.

GTE contributed $$8,000$ to charity.

GTE received a $$2,200$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation distributing the dividend$),$ and it recognized $$2,100$ in short$-$term capital gain when it sold some of the stock.

On December $1,2022,$ GTE distributed $$26,000$ to James and $$26,000$ to Paul.

GTE has qualified property of $$306,000($unadjusted basis$).$

c$-1.$ Assume James and Paul formed GTE as a C corporation.