Problem
Thomas and his wife Diana have operated their children's daycare for the last three years. They also own the daycare facility, a building, and the adjacent land on 1322 Glades Road. They have limited working capital but do not foresee the need to make additional capital improvements soon. Their total business assets are about $250,000 with a $120,000 mortgage on the building as their only liability. In recent years they have not kept exact records, but have been able to withdraw any unneeded assets at the end of the year, which totaled approximately $50,000 in cash in 2022. In 2022 they reported a net income of $85,000.
Understand what changes, if any, would an S-corp status have on their taxable income from the company?