Business, 12.04.2021 20:10 mfar4087

Mabel and Alan, who are in the 32% tax bracket, recently acquired a fast-food franchise. They both will work in the business and receive a salary of $175,000. They anticipate that the annual profits of the business, after deducting salaries, will be approximately $450,000. The entity will distribute only enough cash, as a dividends distribution, each year to Mabel and Alan to cover their Federal income taxes associated with any flow-through income from the franchise. Any remaining profits will be reinvested in the business. (excluding any tax related to their salaries). Required:
a. What amount will the entity distribute (to cover Mabel and Alan's Federal income taxes associated with the franchise) if the franchise operates as a C corporation?
b. What amount will the entity distribute (to cover Mabel and Alan's Federal income taxes associated with the franchise) if the franchise operates as an S corporation? Ignore the impact of any potential qualified business income deduction.
c. What will be the amount of the combined entity/owner tax liability (including salaries) in parts (a) and (b)?

Part (a): $
Part (b): $

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Mabel and Alan, who are in the 32% tax bracket, recently acquired a fast-food franchise. They both w...

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