Homework Assignment Chapter 11

Homework Assignment Chapter 11 - Homework Assignment...

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Homework Assignment Chapter 11 Tax Planning and Research C:11-29 a. What is Delta’s income tax liability assuming Carl withdraws none of the earnings from the C corporation? What is Carl’s income liability? What is the total tax liability for the corporation and its shareholders? 1. Delta’s income tax liability $41,750 2. Carl’s income tax liability is zero. 3. The total tax liability of the corporation and its shareholders is $41,750. b. Assume that Delta instead distributes $80,000 of its after-tax earnings to Carl as a dividend in the current year. What is the total income tax liability for the C corporation and its shareholder? 1. Even though Delta distributed dividends of $80,000 which does not affect its tax liability which remains the same $41,750. 2. Carl’s income tax liability is $5,498. c. How would you answer Part a if Carl withdrew $80,000 from the business in salary? Assume the corporation pays $6,000 of Social Security taxes on the salary, which it can deduct from the $150,000 taxable income amount in part a. Carl also pays $6,000 of Social Security taxes on the salary which he cannot deduct. 1. Delta’s income tax amount $11,000 Social Security tax 6,000 _ Total tax $17,000 Carl’s income tax liability ($80,000) $13,844 Social Security tax 6,000 _ Total tax liability $19,844 d. How would your answers to Parts a-c change if Delta were instead an S corporation?
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