Purple Company records $200,000 in net income for 2019 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,200 standard deduction. Purple Company is Kirsten's only source of income.
Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations.
Click here to access the 2019 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%.
When required, carryout intermediate tax computations to the nearest cent and then round your final tax liability to the nearest dollar.
a. If Purple is a proprietorship. Kirsten
withdraws $50,000 from the business during the year; she claims a
$37,560 deduction for qualified business income. Kirsten's taxable
income is
$, and her after-tax income is $.
b. Purple is a C corporation and pays out all of its after-tax income as a dividend to Kirsten.
Note: Individual taxpayers received preferential treatment regarding the taxation of qualified dividends (0%,15%,20%). For single taxpayers, the 0 percent rate applies to the first $38,600 of taxable income.
Purple Corporation's after-tax income is $ and Kristen's after tax income is $.
c. Purple is a C corporation and pays Kirsten a
salary of $158,000. Kirsten's after-tax income is
$.
Part A
Income from proprietorship |
$200,000 |
Less: deduction for qualified business income |
(37560) |
Less: standard Deduction |
(12200) |
Taxable income |
150240 |
Tax on $150240 |
30232 (14382.50 + (24%*(150240-84200))) |
After-tax income ($200,000 – $30232) |
$169767 |
Part B
Tax on corporation’s net income of $200,000 = 200000*21% = 42000
Corporation’s after-tax income = 200000-42000 = 158000
Kirsten’s taxable income = 158000-12200 standard deduction = 145800
Kirsten’s tax on $146000 at rates applicable to dividends = (39375*0%)+((145800-39375)*15%) = 15964
Kirsten’s after-tax income = 158000-15964 = $142036
Part C
Taxable income of corporation = 200000-158000 = 42000
Taxable income of Kristen = 158000-12200 standard deduction = 145800
Kristen’s tax = (14382.50 + (24%*(145800-84200)))= 29167
Kirsten’s after-tax income = 145800-29167 = $116633
Purple Company records $200,000 in net income for 2019 before deducting any compensation or other payment...
Purple Company records $200,000 in net income for 2019 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,200 standard deduction. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2019 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required, carryout intermediate...
Purple Company has $200,000 in net income for 2019 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12.200 standard deduction for 2019. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2019 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required,...
Purple Company has $200,000 in net income for 2018 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,000 standard deduction for 2018. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Assume the corporate tax rate is 21%. When required, carryout intermediate tax computations to the nearest cent and then round your final tax liability...
Purple Company has $200,000 in net income for 2018 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,000 standard deduction for 2018. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2018 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required,...
Purple Company has $200,000 in net income for 2018 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,000 standard deduction for 2018. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2018 individual tax rate schedule to use for this problem. [ https://imgur.com/a/SOIZ22u ] Assume the corporate tax rate is...
Purple Company has $200,000 in net income for 2019 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,200 standard deduction for 2019. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Access the 2019 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required, carryout intermediate tax...
Problem 2-23 (LO. 1) Purple Company has $200,000 in net income for 2019 before deducting any compensation or other payment to its sole owner, Kirsten Kirsten is single and she claims the $12,200 standard deduction for 2019. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after tax income for each of the following situations. Click here to access the 2019 individual tax rate schedule to use for this problem. Assume the corporate tax...
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urple Company has $200,000 in net income for 2020 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,400 standard deduction for 2020. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2020 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required,...
Problem 2-23 (LO. 1) Purple Company has $200,000 in net income for 2020 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,400 standard deduction for 2020. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. following situations. Click here to access the 2020 individual tax rate schedule to use for this problem. Assume the corporate...