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Dawn Taylor, single, owns 100% of Cool Touch Cookware ("CTC"). CTC purchases unfinished cookware from...

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Accounting

Dawn Taylor, single, owns 100% of Cool Touch Cookware ("CTC"). CTC purchases unfinished cookware from manufacturers. Dawn has developed a special coating, which when applied, allows the cookware to stay cool to the touch while in use. Her business applies the coating and sells the finished cookware.

Assume CTC has pre-tax income of $140,000, prior to a salary of $60,000 payable to Dawn. It distributes all of its income to Dawn. Calculate the total tax expense, at the entity and owner level, related to the operations of CTC under the three scenarios: (1) CTC operates as a corporation with no special elections, (2) CTC operates as a LLC with no special elections, and (3) CTC operates as either a corporation or LLC, but with a S Corporation election.

Assume that Dawn had $20,000 of ordinary (non-preferential) investment income as well and will claim the standard deduction of $12,550. Assume a preferential tax rate of 15%.

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