Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $450,000 of which $250,000 is attributed to the sole proprietorship. Ornie and Jane are contenplating incorporarting their sole proprietorship. (Use the tax rate schedule)

a. Using the married-joint tax brackets and the corporatw tax rate of 21 percent, find out how much current tax this strategy couls save Orie and Jane.

b. How much income should be left in the corporation?

viduals edule X-Single axable income is over: But not over: The tax is: $ 9,525 $ 10% of taxable income 0 $ 38,700 $952.50 plus 12% of the excess over $9,525 $ 9,525 $ 82,500 $ 38,700 $4.453.50 plus 22% of the excess over $38,700 $ 82,500 $157,500 $14,089.50 plus 24% of the excess over $82,500 $200,000 $32,089.50 plus 32% of the excess over $157,500 $157,500 $45,689.50 plus 35% of the excess over $200,000 $500,000 $200,000 $150,689.50 plus 37% of the excess over $500,000 $500,000 dule Y-1-Married Filing Jointly or Qualifying Widow(er) The tax is: xable income is over: But not over: 10% of taxable income S 19,050 0 $1,905 plus 12% of the excess over $19,050 $ 77,400 S 19,050 $8.907 plus 22% of the excess over $77,400 S 77,400 $165,000 $28,179 plus 24% of the excess over $165,000 S315,000 $165,000 $64,179 plus 32% of the excess over $315,000 $400,000 $315,000 $91.379 plus 35% of the excess over $400,000 $400,000 $600,000 $161.379 plus 37% of the excess over $600,000 $600,000 Schedule Z-Head of Household The tax is: If taxable income is over: But not over: 10% of taxable income $ 13,600 0 $ 51,800 $1,360 plus 12 % of the excess over $13,600 $ 13,600 $ 82,500 $5,944 plus 22% of the excess over $51,800 S 51,800 $12,698 plus 24% of the excess over $82,500 S 82,500 $157,500 $30,698 plus 32% of the excess over $157,500 $200,000 $157,500 $44,298 plus 35% of the excess over $200,000 $500,000 $200,000 $149,298 plus 37% of the excess over $500,000 $500,000 Schedule Y-2-Married Filing Separately The tax is: If taxable income is over: But not over: 10% of taxable income S 9,525 $ 0 $952.50 plus 12 % of the excess over $9,525 S 9,525 38,700 $ 82,500 $4,453.50 plus 22% of the excess over $38,700 S 38,700 |$14,089.50 plus 24% of the excess over $82,500 S 82,500 $157,500 $32,089.50 plus 32% of the excess over $157,500 $200,000 $157,500 $45,689.50 plus 35% of the excess over $200,000 $300,000 $200,000 $80,689.50 plus 37% of the excess over $300,000 S300,000