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Owl is a closely held corporation owned by 8 shareholders (each has 12.5% of the stock). Selected financial information provided by Owl follow: Taxable income $6,250,000. Positive AMT adjustment (excluding ACE adjustment) 600,000. Negative AMT adjustments (30,000). Tax preferences 5,000,000. Retained earnings 900,000. Accumulated E&P 2,000,000. ACE adjustment 750,000.

a. find out Owl's tax liability if Owl is a C corporation.

b. find out Owl's tax liability if Owl is an S corporation.

c. How would your answers in (a) and (b) change if Owl is not closely held (e.g., 5,000 shareholders with no shareholder owning more than 2% of the stock)?

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