a. Keith Thomas and Thomas Brooks began a new consulting business on January 1, 2015. They organized the business as a C corporation, KT, Inc. During 2015, the corporation was successful and generated revenues of $1,300,000. KT had operating expenses of $800,000 before any payments to Keith or Thomas. During 2015, KT paid dividends to Keith and Thomas in the amount of $165,000 each. Assume that Keith had other ordinary taxable income of $130,000, itemized deductions of $40,000, is married (wife has no income), and has no children. Compute the total tax liability of KT and Keith for 2015. Ignore any phaseout of itemized deductions or reduction of personal exemptions.
b. Instead of organizing the consulting business as a C corporation, assume Keith and Thomas organized the business as a limited liability company, KT, LLC. KT made a distribution of $250,000 each to Keith and Thomas during 2015. Compute the total tax liability of KT and Keith for 2015. Ignore any phaseout of itemized deductions, any phase out of personal exemptions, and additional tax on net investment income.