Paige Is Starting Paige's Poodle Parlor and Is Considering Alternative

question 42

Essay

Paige is starting Paige's Poodle Parlor and is considering alternative organizational forms.She anticipates the business will earn $100,000 from operating before compensating her for her services and before charitable contributions.Page,who is single,has $6,000 of income from other sources and other itemized deductions of $12,000.Her compensation for services will be $50,000.Charitable contributions to be made by the business are expected to be $5,000.Other distributions (dividends)to her from the business are expected to be $14,000.
Required: Compare her current income tax assuming she operates the business as a proprietorship,an S corporation,and a C corporation.Ignore payroll and other taxes.

---

Definitions:

Rendering

The process of generating a photorealistic or non-photorealistic image from a 2D or 3D model through computer software.

Unconditional Assignment

The transfer of all rights and interests in a piece of property or contract to another party without any conditions.

Rights of Assignee

Legal entitlements transferred to an assignee, allowing them to claim the benefits under the contract or agreement from the assignor.

Business Loan

A loan specifically intended for business purposes, where funds are lent to a business entity in exchange for future repayment of the loan principal amount along with interest or other finance charges.