$3.$ Required information

Problem $12-51($LO $12-3)($Algo$)$

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$[$The following information applies to the questions displayed below.$]$

Sandra would like to organize LAB $($a legal corporation$)$ as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an $8$ percent annual before$-$tax return on a $$900,000$ investment. Sandra's marginal income tax rate is $37$ percent and her tax rate on qualified dividends and net capital gains is $20$ percent. LAB's income is not qualified business income $($QBI$),$ so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity$-$level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers.

Note: Round your intermediate computations to the nearest whole dollar amount.

Problem $12-51$ Part a $($Algo$)$

a$.$ How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation?

b$.$ What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a C corporation?

Note: Round your final answers to $2$ decimal places.