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310.9 Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax...

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Question

Accounting

310.9

Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $8,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent.

Required:

  1. What could Tawana do to reduce her family tax burden? answer for this is employ her son in her sole proprietorship
  2. How much pretax income does it currently take Tawana to generate the $8,000 (after taxes) given to Jonathon?
  3. If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)?
  4. How much money would the strategy in part (c) save?
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