Mike Barton owns Barton Products,Inc. The corporation has 30 employees. Barton corporation expects 800,000.00 of net income before taxes in 2012. Mike is married and files a joint return with his wife,Elaine, who has no earnings of her own. They have one dependant son, who is 16. Mike and Elaine have no other income and do not itemize. Mike's salary is 180,000.00 per year(already deducted in computing Barton Corporations 500,000.00 net income). Assume that variations in salaries will not effect the US production activities deductions already reflected in taxable income.

Tasks:

A. Should Mike increase his salary by 50,000.00 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% pal tax with the corporate prtion being deductible.

B. Should Barton corporation employ Elaine for 50,000.00 rather than increase Mike's salary? Take into consideration employment taxes and federal taxes. Note that Elaine's salary would be well below the social scuriy cap, so that she and the corporation would each incur the full amount of payroll taxes with the corporate portion being deductible. In 2012, Elaine's portio is 5.65%, and the corporations is 7.65%. After 2012, Elaine's portion i 7.65%.

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