Final answer:
The nontaxable amount for Peter, assuming he has sufficient stock basis in the S-Corporation, would likely be the $75,000 in distributions. Any salary is subject to applicable taxes.
Step-by-step explanation:
The question asks what amount will be nontaxable for Peter out of the $225,000 he plans to take from his S-Corporation, which includes $75,000 in distributions. In general, distributions from an S-Corporation are not subject to tax if they do not exceed a shareholder's stock basis. The basis is typically the amount of capital that the shareholder has invested in the company.
However, without further information about Peter's stock basis in the S-Corporation, we cannot definitively say which amount is nontaxable. Assuming Peter has a sufficient stock basis to cover his distributions, the $75,000 in distributions would typically be the nontaxable portion. Any salary that Peter receives as an employee is subject to income tax, social security tax, and medicare tax. Therefore, the correct answer is that $75,000 will likely be nontaxable to Peter, assuming that his stock basis is at least that amount.