LO.1 In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 37% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations. (Ignore the deduction for qualified business income and the 3.8% Medicare surtax on net investment income.) a. Azure is a C corporation and pays no dividends or salary to Sasha. b. Azure is a C corporation and distributes $75,000 of dividends to Sasha. C. Azure is a C corporation and pays $75,000 of salary to Sasha. d. e. Azure is a sole proprietorship, and Sasha withdraws $0. Azure is a sole proprietorship, and Sasha withdraws $75,000.
LO.1 In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 37% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations. (Ignore the deduction for qualified business income and the 3.8% Medicare surtax on net investment income.) a. Azure is a C corporation and pays no dividends or salary to Sasha. b. Azure is a C corporation and distributes $75,000 of dividends to Sasha. C. Azure is a C corporation and pays $75,000 of salary to Sasha. d. e. Azure is a sole proprietorship, and Sasha withdraws $0. Azure is a sole proprietorship, and Sasha withdraws $75,000.
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 32P
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Transcribed Image Text:LO.1 In the current year, Azure Company has $350,000 of net operating income
before deducting any compensation or other payment to its sole owner, Sasha. In
addition, Azure has interest on municipal bonds of $25,000. Sasha has significant
income from other sources and is in the 37% marginal tax bracket. Based on this
information, determine the income tax consequences to Azure Company and to Sasha
during the year for each of the following independent situations. (Ignore the
deduction for qualified business income and the 3.8% Medicare surtax on net
investment income.)
a. Azure is a C corporation and pays no dividends or salary to Sasha.
b.
Azure is a C corporation and distributes $75,000 of dividends to Sasha.
C.
Azure is a C corporation and pays $75,000 of salary to Sasha.
d.
e.
Azure is a sole proprietorship, and Sasha withdraws $0.
Azure is a sole proprietorship, and Sasha withdraws $75,000.
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