Question
Lucia, a single taxpayer, operates a florist business. She is considering either continuing the business as a sole proprietorship or reorganizing it as either a
Lucia, a single taxpayer, operates a florist business. She is considering either continuing the business as a sole proprietorship or reorganizing it as either a C corporation or an S corporation. Her goal is to withdraw $20,000 of profits from the business annually while minimizing her total tax liability. She expects the business to generate annually 50,000 of taxable income before considering a deductible salary expense.Which business form(s) can best achieve Lucia's goals? Sole Proprietorship, C Corporation with Salary, C Corporation with Dividend, S Corporation with Salary, or S Corporation with Dividend?
I already completed the top portion of the question, just need help with the bottom portion of the question. Which is in the attached file. This is what i have so far for the bottom portion which is most of the work, just need clarification on my answers.
Sole Pro.. C Corp. w/Salary C Corp. w/Dividend S Corp. w/Salary S Corp. w/Dividend
Pass-through income $50,000 30,000 50,000 30,000 50,000
Salary Income $20,000 20,000 0 20,000 0
Dividend Income $ 0 0 20,000 0 20,000
Total Income to Lucia $50,000 20,000 20,000 50,000 50,000
Lucia's Tax $12,500 9,500 10,500 12,500 12,500
The check feature states that I have some of the pass -through income incorrect. But that doesn't mean that, that is the only answers that are incorrect, I only have one final time to check my answer after that it will be marked incorrect. Thanks
Sole Proprietorship Entity Level: Income before salary Salary deduction Taxable income Entity level tax Lucia Pass-through Income Salary Income Dividend Income Total Income to Lucia Lucia's Tax $50,000 0 $50,000 $0 C Corporation with Salary $50,000 -20,000 $30,000 $4,500 C Corporation with Dividend $50,000 0 $50,000 $7,500 S Corporation with Salary $50,000 -20,000 $30,000 $0 S Corporation with Distribution $50,000 0 $50,000 $0
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