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American Corporation has two equal shareholders, Mr$.$ Freedom and Brave, Incorporated. In addition

to their investments in American stock, both shareholders have made substantial loans to American.

During the current year, American paid $$250,000$ interest each to Mr$.$ Freedom and Brave,

Incorporated. Assume that American and Brave have $21$ percent tax rates, and Mr$.$ Freedom's margini

tax rate on ordinary income is $37$ percent.

Required:

a$.$ Calculate American's tax savings from deduction of these interest payments and their after$-$tax

cost$.$

b$.$ Calculate Brave's tax cost and after$-$tax earnings from its receipt of interest income from American

c$.$ Calculate Mr$.$ Freedom's tax cost and after$-$tax earnings from his receipt of interest income from

American.

e$.$ Recalculate Brave's tax cost and after$-$tax earnings assuming its receipt of interest from American i

treated as a constructive dividend.

f$.$ Recalculate Mr$.$ Freedom's tax cost and after$-$tax earnings assuming his receipt of interest from

American is treated as a constructive dividend.

Answer is complete but not entirely correct.