Refer to the information in problem 37 and assume modified AGI is equal to salary income. Complete the solution to this problem considering both income and employment taxes. (Employment taxes are discussed in Chapter 4 and investment income surtaxes in Chapter 3) How would your answers change if the distributions made by the S and C corporations were salary payments subject to employment taxes?
In problem
Assume the same facts as in the previous problem, except that the business expects to make a cash distribution of $28,000 each to June and John the first year. Determine how much tax the business will pay and how much additional tax they will personally pay if they form the business as a partnership, S corporation, or C corporation. Consider only income taxes.