Answer:
the question is incomplete:
a. Azure is a C corporation and pays no dividends or salary to Sasha.
Azure Company, as a C corporation, has taxable income of <u>$350,000</u> and corporate income tax of <u>$73,500 (21% of net income)</u>. Sasha has taxable income of <u>$0</u> from Azure.
b. Azure is a C corporation and distributes $75,000 of dividends to Sasha.
Azure Company has taxable income of <u>$350,000</u> and corporate income tax of <u>$73,500 (21% of net income)</u>. Sasha incurs income tax of <u>$15,000 (20% tax rate)</u> with respect to the dividends.
c. Azure is a C corporation and pays $75,000 of salary to Sasha. (Ignore payroll taxes.)
The salary paid to Sasha <u>is</u> deductible by Azure Company resulting in taxable income of <u>$275,000</u> and corporate income tax of <u>$57,750 (21% of net income)</u>. Sasha incurs income tax of <u>$27,750 (37% marginal tax rate) </u>with respect to the salary she received during the year.
d. Azure is a sole proprietorship, and Sasha withdraws $0. (Ignore self-employment taxes.)
There <u>is no</u> Federal income tax applicable to businesses formed as sole proprietorships. Sasha incurs income tax of <u>$129,500 (37% of $350,000)</u> with respect to Azure Company.
e. Azure is a sole proprietorship, and Sasha withdraws $75,000. (Ignore self-employment taxes.)
There <u>is no</u> Federal income tax applicable to businesses formed as sole proprietorships. Sasha <u>will</u> pay tax on the income of Azure Company, <u>regardless of</u> the amount she withdraws. Applicable taxes are the same a in (d).