Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $8,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent. (skipping part A) b) How much pretax income does it currently take Tawana to generate the $8,000 (after taxes) given to Jonathon? c) If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)? d) How much money would the strategy in part (c) save?
Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $8,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent. (skipping part A) b) How much pretax income does it currently take Tawana to generate the $8,000 (after taxes) given to Jonathon? c) If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)? d) How much money would the strategy in part (c) save?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $8,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent. (skipping part A) b) How much pretax income does it currently take Tawana to generate the $8,000 (after taxes) given to Jonathon? c) If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)? d) How much money would the strategy in part (c) save?
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