Problem
Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $300,000, of which $125,000 is attributed
Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $300,000, of which $125,000 is attributed to the sole proprietorship. Orie and Jane are contemplating incorporating their sole proprietorship. (Use the tax 2016 rate schedule and corporate income tax brackets).
a. Using the married-joint tax brackets and the corporate tax brackets, find out how much current tax this strategy could save Orie and Jane.
b. How much income should be left in the corporation?