Mike Barton owns Barton Products, Inc. The corporation has 30 employees. Barton Corporation expects $800,000 of net income before taxes in 2019. Mike is married and files a joint return with his wife, Elaine, who has no earnings of her own. Mike and Elaine have no other income, file a joint tax return, and claim the standard deduction. Mike's salary is $200,000 per year (already deducted in computing Barton Corporation's $800,000 net income).

a. With the given facts, calculate the tax liability for Barton Corporation and for Mike and Elaine.

b. Should Mike increase his salary from Barton by $50,000 to reduce the overall tax burden to himself and Barton Products? Because of the Social Security cap, the corporation and Mike each would incur a 1.45% payroll tax with the corporate portion being deductible.

c. Should Barton employ Mike's wife Elaine for $50,000 rather than increase Mike's salary? Take into consideration employment taxes as well as federal income taxes. Note, that Elaine's salary would be well below the Social Security cap, so that she and the corporation each would incur the full amount of payroll taxes with the corporate portion being deductible. Both Elaine's and the corporation's portion is 7.6S%.