a. Mr. Lion's salary is $100,000, and Toto pays no dividends. b. Mr. Lion's salary is $100,000, and Toto distributes its after-tax income as a dividend. c. Toto is an S corporation. Mr. Lion's salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. d. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. e. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. a. Income tax burden on this profit b. Income tax burden on this profit c. Income tax burden on this profit d. Income tax burden on this profit e. Income tax burden on this profit $ $ Amount 110,500 165,800

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Do not give image format
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Toto's average
annual net profit (before deduction of Mr. Lion's salary) is $450,000. For each of the following cases, compute the income tax burden
on this profit. (Ignore any payroll tax consequences.)
Required:
a. Mr. Lion's salary is $100,000, and Toto pays no dividends.
b. Mr. Lion's salary is $100,000, and Toto distributes its after-tax income as a dividend.
c. Toto is an S corporation. Mr. Lion's salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income
qualifies for the 20 percent QBI deduction.
d. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for
the 20 percent QBI deduction.
e. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's
ordinary income qualifies for the 20 percent QBI deduction.
a. Income tax burden on this profit
b. Income tax burden on this profit
c. Income tax burden on this profit
d. Income tax burden on this profit
e. Income tax burden on this profit
Amount
$
110,500
$ 165,800
Transcribed Image Text:Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Toto's average annual net profit (before deduction of Mr. Lion's salary) is $450,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.) Required: a. Mr. Lion's salary is $100,000, and Toto pays no dividends. b. Mr. Lion's salary is $100,000, and Toto distributes its after-tax income as a dividend. c. Toto is an S corporation. Mr. Lion's salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. d. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. e. Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction. a. Income tax burden on this profit b. Income tax burden on this profit c. Income tax burden on this profit d. Income tax burden on this profit e. Income tax burden on this profit Amount $ 110,500 $ 165,800
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Corporate Distributions and Adjustments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education