Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides
Question:
Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $19,500 a year for college expenses. Jonathon works as a pizza delivery person every fall, and has a marginal tax rate of 15 percent. |
a. | What could Tawana do to reduce her family tax burden? | ||||||
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b. | How much pretax income does it currently take Tawana to generate the $19,500 after taxes given to Jonathon? (Round your answer to the nearest whole dollar amount.) |
c. | If Jonathon worked for his mother’s sole proprietorship, what salary would she have to pay him to generate $19,500 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)?(Round your answer to the nearest whole dollar amount.) |
d. | How much money would this strategy save? (Round your intermediate calculations and final answers to the nearest whole dollar amount.) |
Essentials of Federal Taxation 2019
ISBN: 9781260190045
10th edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver