Mr. Wise, who is in the 37 percent tax bracket, is the sole shareholder of...
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Accounting
Mr. Wise, who is in the 37 percent tax bracket, is the sole shareholder of Bobs Inc., which manufactures greeting cards. Bob's average annual net profit (before deduction of Mr. Wise's salary) is $320,000. For each of the following cases, compute the income tax burden on this profit. Assume that all dividends are taxed to individuals at a 20% tax rate.(Ignore any payroll tax consequences.)
Required:
A. Mr. Wise's salary is $100,000 and Bob distributes its after-tax income as a dividend.
B. Bob is an A corporation. Mr. Bob's salary is $100,000 and Bob makes no cash distributions.
C. Bob is an A corporation. Mr. Wise's salary is $100,000 and Bob makes no cash distributions. Assume Bob's ordinary income qualifies for the 20 percent QBI deduction, subject to no limitations
D. Bob is an A corporation. Mr. Wise draws no salary, and Bob makes no cash distributions. Assume Bob's ordinary income qualifies for the 20 percent QBI deduction, subject to no limitations.
E. Bob is an A corporation. Mr. Wise draws no salary, and Bob makes cash distributions of all its income to Mr. Wise. Assume Bob's ordinary income qualifies for the 20 percent QBI deduction, subject to no limitations.
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