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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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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part B please explain Do not Give image format
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: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
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
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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