In the present year, Azure Company has $350,000 of remaining operating income before deducting any compensation or other payments to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 35 percent marginal tax bracket. Based on this information,
Evaluate the income tax consequences to Azure Company and to Sasha during the year for each of the subsequent independent situations.
a. Azure is a C corporation and pays no salary or dividends to Sasha.
b. Azure is a C corporation and distributes $75,000 of dividends to Sasha.
c. Azure is a C corporation and pays $75,000 of salary to Sasha.
d. Azure is a sole proprietorship, and Sasha withdraws $0.
e. Azure is a sole proprietorship, and Sasha withdraws $75,000.