Problem: Module $9$ Textbook Problem $9$

Learning Objective: $9-6$ Explain why individuals once again can use corporations as tax shelters

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 $$51,000$ per year, before considering the QBI deduction. As a sole proprietor, Megan qualifies for the $20$ percent deduction, reducing taxable income from the business to $$40,800$

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.$)$

$\backslash$table$[[$Income tax liability if operated as a C corporation,,$],[$Income tax savings,,per year$],[$Should Megan consider incorporating and operating the business through a C corporation?,Yes,$]]$