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What amount will the entity distribute

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Problem - Mabel and Alan, who are in the 32% tax bracket, recently acquired a fast-food franchise. They both will work in the business and receive a salary of $175,000. They anticipate that the annual profits of the business, after deducting salaries, will be approximately $450,000. The entity will distribute enough cash each year to Mabel and Alan to cover their Federal income taxes associated with the franchise.

Required -

a. What amount will the entity distribute if the franchise operates as a C corporation?

b. What amount will the entity distribute if the franchise operates as an S corporation?

c. What will be the amount of the combined entity/owner tax liability in parts (a) and (b)?

Reference no: EM132649413

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