question is attached.
Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 33% tax bracket and dividends are taxable at 15%.
Click here to access the tax rate schedule to use for this problem.
If an amount is zero, enter 0. When required, round your answers to the nearest dollar.
a. Assume that Plum will reinvest its after-tax earnings in the growth of the company.
If Plum operates as a C corporation, the corporation s income tax will be $
, and the shareholders liability will be $
. If Plum operates as an S corporation, the corporation s income tax will be $
and the shareholders liability will be $
.
Therefore, viewed from an entity-owner perspective, operating as
will result in overall tax savings.
b. Assume that Plum will distribute its after-tax earnings each year to its shareholders.
If Plum operates as a C corporation, the corporation s income tax will be $
, and the shareholders liability will be $
. If Plum operates as an S corporation, the corporation s income tax will be $
and the shareholders liability will be $
.
Therefore, viewed from an entity-owner perspective, operating as
will result in overall tax savings.
question is attached
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