18 Jan

LL began a consulting business on 1/1/2016

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Question: LL began a consulting business on 1/1/2016. Her bu…

LL began a consulting business on 1/1/2016. Her business is organized as a C (Regular Corporation) called L & L, Inc. Lucy owns 100% of the company’s stock.

L & L, Inc.

Income and expense information for 2016:

Revenues 1020000

Operating expenses 870000

Qualified dividend paid to Lucy during year 100000

Lucy did not receive any salary from the business. Lucy and Jason Lindsey (married, filing joint return; no children)

Other information for 2016:

Jason’s salary as a sales manager for a car dealership 142000

Total itemized deductions for couple 28000

A .What is the total tax liability for the corporation and the individuals?

B .Assume that Luc y’s business was organized as an LLC rather than as a C corporation. The revenue and expense information is the same as that above. Lucy received a distribution of100, 000 from the LLC. The couple’s other income and deductions are unchanged.

C What is the total tax liability for the LLC and the individuals?

  1. What would you recommend that Lucy do to improve the overall tax situation if she prefers to operate as a C crop?

 

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