ahing business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets th siness, and provides supplies and equipment. The business has been generating net taxable profits of $73,000 per year, bem nsidering the QBI deduction. As a sole proprietor, Megan qualifies for the 20 percent deduction, reducing taxable income fre siness to $58,400. equired: Assume that Megan's marginal tax rate on ordinary income is 35 percent and that she has no pressing need for cash flow from siness. Should Megan consider incorporating and operating the business through a C corporation? Assume that C Corporation bject to a 21% tax rate. Fill the below table to justify your answers. (Ignore any payroll or self-employment tax considerations.) Answer is complete and correct. moome tax liability if operated as a C corporation income tax savings Should Megan consider incorporating and operating the business through a C corporation? $ 15,330 $ 5,110 Yos per year
ahing business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets th siness, and provides supplies and equipment. The business has been generating net taxable profits of $73,000 per year, bem nsidering the QBI deduction. As a sole proprietor, Megan qualifies for the 20 percent deduction, reducing taxable income fre siness to $58,400. equired: Assume that Megan's marginal tax rate on ordinary income is 35 percent and that she has no pressing need for cash flow from siness. Should Megan consider incorporating and operating the business through a C corporation? Assume that C Corporation bject to a 21% tax rate. Fill the below table to justify your answers. (Ignore any payroll or self-employment tax considerations.) Answer is complete and correct. moome tax liability if operated as a C corporation income tax savings Should Megan consider incorporating and operating the business through a C corporation? $ 15,330 $ 5,110 Yos per year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
part B please explain
Do not Give image format
Transcribed Image Text:b. How would your conclusion in part a change if Megan's marginal tax rate were only 28 percent?
Annual tax savings
will
Answer is not complete.
decrease
to
Transcribed Image Text:Megan operates a housecleaning business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets the
business, and provides supplies and equipment. The business has been generating net taxable profits of $73,000 per year, before
considering the QBI deduction. As a sole proprietor, Megan qualifies for the 20 percent deduction, reducing taxable income from the
business to $58,400.
Required:
a. Assume that Megan's marginal tax rate on ordinary income is 35 percent and that she has no pressing need for cash flow from this
business. Should Megan consider incorporating and operating the business through a C corporation? Assume that C Corporations are
subject to a 21% tax rate. Fill the below table to justify your answers. (Ignore any payroll or self-employment tax considerations.)
Answer is complete and correct.
Income tax liability if operated as a C corporation
Income tax savings
Should Megan consider incorporating and operating the business through a C corporation?
15,330
5,110 per year
Yes
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