Question

In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 37% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations. (Ignore the deduction for qualified business income and the 3.8% Medicare surtax on net investment income.) The rates on qualified dividends are 0%, 15% and 20%. If an amount is zero, enter "O". a. Azure is a C corporation and pays no dividends or salary to Sasha. Azure Company, as a C corporation, has taxable income of $ 350,000 and corporate income tax of $ 73,500 Sasha has taxable income of $ 0 from Azure. b. Azure is a C corporation and distributes $75,000 of dividends to Sasha. Azure Company has taxable income of $ 350,000 and corporate income tax of $ 73,500 Sasha incurs income tax of $ 11,250 with respect to the dividends. c. Azure is a C corporation and pays $75,000 of salary to Sasha. (Ignore payroll taxes.) The salary paid to Sasha is deductible by Azure Company resulting in taxable income of $ 275,000 and corporate income tax of $ 57,750 Sasha incurs income tax of $ 27,750 with respect to the salary she received during the year.
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Answer 1

d. Business formed There is no federal income tax applicable to a sole proprietorships. Sasha in curs income tax of $1,29,500 with respect to Azure company. $ 3,50000 x 37 ( 37% Marginal 100 Tax ) - $1,29,500 e. There is no Federal income tax applicable to business formed at sole proprietorship. Sasha will pay tax on the Pincome of Azure .company, regardless of the amount.. Note => Interest on municipal bonds acte exempt from tax for both corporations and individual

a. Azure Company 9 Corporation, has taxable income of $ 3,50,000 and componate income tax of $ 73500 = $ 350000 x 21 $ 73500 100

b. 75000 x 15 loo $ 11250 C. Taxable income $275000 (350000 - 75000) Comparate Tax = $71443 (46628 +(354. * 275000–204100) ) Income Tax $ 27750 (75000 × 37 100

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