Charger, Inc., has the following items for the current year:
Net operating income .............................................. $130,000
Dividend income (50% owned corporation) ...................... 40,000
Charitable cash contributions ....................................... 20,000
Net operating loss carryover ........................................ 10,000
a. What are the corporation's taxable income and tax liability?
b. Assume that Charger is, and always has been, an S corporation wholly owned by Suzanne, a married individual with no dependents and no other income or deductions. What are the tax liabilities of Charger and Suzanne?
c. Write a memo explaining why the answers in part a and b are different.