Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $...
Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $22,000 a year for college expenses. Jonathon works as a pizza delivery person every fall, and has a marginal tax rate of 15 percent.
b. How much pretax income does it currently take Tawana to generate the $22,000 (after taxes) given to Jonathon? (Round your answer to the nearest whole dollar amount.)
Pre Tax Income:
c. If Jonathon worked for his mother’s sole proprietorship, what salary would she have to pay him to generate $22,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)? (Round your answer to the nearest whole dollar amount.)
Salary:
d. How much money would this strategy save? (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
This Strategy will save Tawana: __________pretax and will save the family_____after tax
Homework Answers
| b | Pretax income (22000/(1-0.4)) | $ 36,667 |
| c | Pretax income (22000/(1-0.15)) | $ 25,882 |
| d | Pretax Savings (36667-25882) | $ 10,785 |
| Aftertax Savings (10785*0.4) | $ 4,314 |
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Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $...
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