Kamal is starting a new business in 2015 which will operate as an S corporation. This means

Question:

Kamal is starting a new business in 2015 which will operate as an S corporation. This means that income earned by the corporation will be reported by shareholders even if they do not receive distributions. Kamal has $130,000 of income from other sources, and itemized deductions totaling $15,000. He expects that the new business will produce $30,000 of income each year. He is considering giving his son Rashid 20% of the stock in the corporation. Rashid is age 24, and is Kamal’s dependent. Rashid’s only other income is $2,000 of interest. Neither Kamal nor Rashid will be employed by the corporation. Which alternative will produce a lower income tax liability—having all stock owned by Kamal or having Kamal own 80% of the stock and Rashid own 20%? Assume Kamal’s filing status is head-of-household and Rashid is single. Ignore other taxes. How would the answer be different if Rashid were age 17? Ignore credits.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Federal Taxation 2016 Comprehensive

ISBN: 9780134104379

29th Edition

Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson

Question Posted: