LO.3, 4 Flower, Inc., reports taxable income of $700,000 for 2010. Flower has been in business for many years and long ago used up its accumulated earnings credit. Flower has no additional ‘‘reasonable needs of the business’’ for the current tax year.

a. Determine Flower’s total potential tax liability if it declares no dividends.

b. Determine Flower’s total potential tax liability if it declares and pays dividends equal to the entity’s after-tax earnings.

c. Determine Flower’s total potential tax liability in

(a) and

(b) if it is an S corporation.