Polly owns CopyEdit, a sole proprietorship. The net income from CopyEdit is consistently around $207,700. Polly is
Question:
Polly owns CopyEdit, a sole proprietorship. The net income from CopyEdit is consistently around $207,700. Polly is considering making Kevin, one of her employees, an owner of the business. He would continue to be paid his $40,400 salary and own a 25 percent interest in the business. Polly would receive a salary of $101,400 from the new entity. Assume that both Polly and Kevin have income from other sources that offset their allowable deductions, and that they are both single.
Refer to the Tax Rate Schedules to answer the following questions.
Determine the total combined income tax liability (Polly, Kevin and the entity) based on the organizational structure listed.
Round intermediate computations and the final tax liability of each taxpayer to the nearest dollar.
a.Partnership
b.Corporation
c.S corporation