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Moana is a single taxpayer who operates a sole proprietorship. She expects her taxable income next year to be $250,000, of which $200,000 is attributed
Moana is a single taxpayer who operates a sole proprietorship. She expects her taxable income next year to be $250,000, of which $200,000 is attributed to her sole proprietorship. Moana is contemplating incorporating her sole proprietorship. (Use the tax rate schedule.)
Required:
- Using the single individual tax brackets and the corporate tax rate, find out how much current tax this strategy could save Moana (ignore any Social Security, Medicare, or self-employment tax issues).
- How much income should be left in the corporation?
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