Turtle, a C corporation, has taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania, and Alan. Turtle follows a policy of distributing all after-tax earnings to the shareholders. Determine the tax consequences for Turtle, Britney, Shania, and Alan if the corporation pays salaries to Britney, Shania, and Alan as follows. Option 1 Britney Shania Alan $135,000 90,000 75,000 Option 2 Britney Shania Alan If an amount is zero, enter "0". a. Under Option 1: Turtle's taxable income will be $ $67,500 45,000 37,500 . Britney will include in her gross income, and Alan will include $ in her gross income, Shania will include in his gross income.
Turtle, a C corporation, has taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania, and Alan. Turtle follows a policy of distributing all after-tax earnings to the shareholders. Determine the tax consequences for Turtle, Britney, Shania, and Alan if the corporation pays salaries to Britney, Shania, and Alan as follows. Option 1 Britney Shania Alan $135,000 90,000 75,000 Option 2 Britney Shania Alan If an amount is zero, enter "0". a. Under Option 1: Turtle's taxable income will be $ $67,500 45,000 37,500 . Britney will include in her gross income, and Alan will include $ in her gross income, Shania will include in his gross income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Turtle, a C corporation, has taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania,
and Alan. Turtle follows a policy of distributing all after-tax earnings to the shareholders.
Determine the tax consequences for Turtle, Britney, Shania, and Alan if the corporation pays salaries to Britney, Shania, and Alan as
follows.
Option 1
Britney
Shania
Alan
$135,000
90,000
75,000
Option 2
Britney
Shania
Alan
If an amount is zero, enter "0".
a. Under Option 1:
Turtle's taxable income will be $
$67,500
45,000
37,500
Under Option 2:
Turtle's taxable income will be $
. Britney will include $
in her gross income, and Alan will include $
Britney will include $
in her gross income, and Alan will include $
in her gross income, Shania will include
in his gross income.
in her gross income, Shania will include
in his gross income.
b. Is Turtle likely to encounter any Federal income tax problems associated with either option?
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