Turtle, a C corporation, reports 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 $135,000 Shania 90,000 Alan 75,000 Option 2 Britney $67,500 Shania 45,000 Alan 37,500 Are there likely federal income tax problems associated with either option?
Turtle, a C corporation, reports 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 $135,000 Shania 90,000 Alan 75,000 Option 2 Britney $67,500 Shania 45,000 Alan 37,500 Are there likely federal income tax problems associated with either option?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Turtle, a C corporation, reports 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 $135,000
Shania 90,000
Alan 75,000
Option 2
Britney $67,500
Shania 45,000
Alan 37,500
Are there likely federal income tax problems associated with either option?
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