______ 6. You are trying to decide whether to run your business as a corporation or as an individual owner (for example, as a sole proprietorship). One of the factors is the problem of double taxation. Assume that the corporate income tax rate is 35%, the individual income tax rate on dividend income is 15%, and the individual income tax rate on other income is 39.6%. (Note use these tax rates. Dont use the actual tax rate schedule.) The business is expected to generate $625,000 of taxable income. Similar to the example given in class, assume that the amount of dividend income is equal to the corporate after-tax cash flow. How much more after-tax cash flow will you have if you run the business as a sole proprietorship rather than as a corporation? Hint: fill out the following table to help answer the question.

Operated as corporation		Individual owner
Corporation		Individual
Cash Revenue	$825,000	Cash Revenue	$825,000
Cash Expenses	$200,000	Cash Expenses	$200,000
Taxable Income	$625,000	Taxable Income	$625,000
Corporate Income Tax (35%)		Individual Income Tax (39.6%)
Net Income		After-tax net cash flow
Stockholder
Dividend Income
Individual Income Tax (15%)
After-tax net cash flow

______ 7. You are trying to decide whether to run your business as a corporation or as an individual owner (for example, as a sole proprietorship). One of the factors is the problem of double taxation. Assume that the corporate income tax rate is 35%, the individual income tax rate on dividend income is 15%, and the individual income tax rate on other income is 39.6%. (Note use these tax rates. Dont use the actual tax rate schedule.) The business is expected to generate $720,000 of taxable income. Similar to the example given in class, assume that the amount of dividend income is equal to the corporate after-tax cash flow. How much more after-tax cash flow will you have if you run the business as a sole proprietorship rather than as a corporation? Hint: fill out the following table to help answer the question.

Operated as corporation		Individual owner
Corporation		Individual
Cash Revenue	$900,000	Cash Revenue	$900,000
Cash Expenses	$180,000	Cash Expenses	$180,000
Taxable Income	$720,000	Taxable Income	$720,000
Corporate Income Tax (35%)		Individual Income Tax (39.6%)
Net Income		After-tax net cash flow
Stockholder
Dividend Income
Individual Income Tax (15%)
After-tax net cash flow