LO.3,4 Owl is a closely held corporation owned by eight shareholders (each has 12.5% of the stock). Its taxable income for the most recent year was $6,250,000. Owl's financial records also provides the following information. Positive AMT adjustments Negative AMT adjustments Tax preferences $ 600,000 (30,000) 5,000,000 Retained earnings Accumulated E & P 900,000 2,000,000

a. Calculate Owl's Federal income tax liability if it is a C corporation.

b. Calculate Owl's Federal income tax liability if it is an S corporation. C. How would your answers in parts

(a) and

(b) change if Owl was not closely held (e.g., 5,000 shareholders with no shareholder owning more than 2% of the stock)?