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Sandra would like to organize LAB a legal corporation as either an S corporation or a C corporation for tax purposes. In
either form, the entity is expected to generate an percent annual beforetax return on a $ investment. Sandra's
marginal income tax rate is percent and her tax rate on qualified dividends and net capital gains is percent. LAB's
income is not qualified business income QBI so Sandra is not allowed to claim the QBI deduction. Assume that LAB will
distribute all of its earnings after entitylevel taxes every year. Ignore the additional Medicare tax and the net investment
income tax when computing your answers.
Note: Round your intermediate computations to the nearest whole dollar amount.
b What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a corporation?
Note: Round your final answers to decimal places.
