LO.4 A business entity’s taxable income before the cost of certain fringe benefits paid to owners and other employees is $400,000. The amounts paid for these fringe benefits are as follows:

Owners Other Employees Group term life insurance $20,000 $40,000 Meals and lodging incurred for the convenience of the employer 50,000 75,000 Pension plan 30,000* 90,000

* H.R. 10 (Keogh) plan for partnership and S corporation.

The business entity is equally owned by four owners.

a. Calculate the taxable income of the business entity if the entity is a partnership, a C corporation, and an S corporation.

b. Determine the effect on the owners for each of the three business forms.