Solution-Compute the income tax burden on this profit

Compute the income tax burden on this profit

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Question - Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which manufactures greeting cards. Toto's average annual net profit (before deduction of Mr. Lion's salary) is $200,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.)

In 2018 the Tax Cuts and Jobs Act went into effect and the corporate rate was moved to 21%.

Required -

Mr. Lion's salary is $100,000, and Toto pays no dividends.

Mr. Lion's salary is $100,000, and Toto distributes its after-tax income as a dividend.

Toto is an S corporation. Mr. Lion's salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.

Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.

Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent QBI deduction.

Reference no: EM132909028

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Compute the income tax burden on this profit

Reference no: EM132909028

Reference no: EM132909028

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