Question

2019 Tax Rate Schedules Single-Schedule X Head of household—Schedule Z If taxable of the If taxable income is: But not amount income is: But not Over- over- The tax is: over Over- over- The tax is: $ 0 $ 9,700 ......... 10% $ 0 $ 13,850 ......... 10% 9,700 39,475 $ 970.00 + 12% 9,700 13,850 52,850 $ 1,385.00 + 12% 39,475 84,200 4,543.00 + 22% 39,475 52,850 84,200 6,065.00 + 22% 84,200 160,725 14,382.50 +24% 84,200 84,200 160,700 12,962.00 + 24% 160,725 204,100 32,748.50 + 32% 160,725 160,700 204,100 31,322.00 + 32% 204,100 510,300 46,628.50 + 35% 204,100 204,100 510,300 45,210.00 + 35% 510,300 153,798.50 + 37% 510,300 510,300 152,380.00 + 37% Married filing jointly or Qualifying widow(er)- Married filing separately–Schedule Y-2 Schedule Y-1 If taxable of the If taxable income is: But not income is: But not Over- over- The tax is: over Over- over- The tax is: $ 0 $ 19,400 .........10% $ 0 $ 0 $ 9,700 .........10% 19,400 78,950 $ 1,940.00 + 12% 19,400 9,700 39,475 $ 970.00 + 12% 78,950 168,400 9,086.00 + 22% 78,950 39,475 84,200 4,543.00 + 22% 168,400 321,450 28,765.00 + 24% 168,400 84,200 160,725 14,382.50 + 24% 321,450 408,200 65,497.00 + 32% 321,450 160,725 204,100 32,748.50 + 32% 408,200 612,350 93,257.00 + 35% 408,200 204,100 306,175 46,628.50 + 35% 612,350 164,709.50 + 37% 612,350 306,175 82,354.75 + 37% of the amount over- $ 0 13,850 52,850 84,200 160,700 204,100 510,300 of the amount over- 0 9,700 39,475 84,200 160,725 204,100 306,175

Answer 1

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