Mike Barton owns Barton Products, In. The corporation has 30 employees. Barton Corporation expects $800,000 of net income before taxes in 2021. Mike is married and files a joint return with his wife, Elaine, who has no carnings of her own. Mike and Elaine have no other income, file a joint tax return, and claim the standard deduction. Mike's salary is $200,000 per year (already deducted in computing Barton Corporation's $800,000 net income). A.

Identify and write down the given facts. Then, calculate the tax liability for Barton Corporation and for Mike and Elaine.

B.

Should Mike increase his salary from Barton by $50,000 to reduce the overall tax burden to himself and Barton Products? Because of the Social Security cap, the corporation and Mike each would incur a 1,45% payroll tax with the corporate portion being deductible.