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

question 138

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 $3,000 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:

Higher Inflation

A situation where the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling, is greater than what is deemed normal or acceptable.

Canadian Dollar

The official currency of Canada, often symbolized as CAD or simply $ when discussing Canadian funds.

U.S. Dollar

The recognized money of the United States, extensively utilized as a standard and reserve currency globally.

Currency Depreciation

A decrease in the value of one currency relative to another currency in the foreign exchange market.