Jayzee Is a Single Taxpayer Who Operates a Sole Proprietorship

question 14

Essay

Jayzee is a single taxpayer who operates a sole proprietorship.He expects his taxable income next year to be $150,000, of which $125,000 is attributed to his sole proprietorship.Jayzee is contemplating incorporating his sole proprietorship.Using the 2019 single individual tax brackets and the corporate tax brackets, how much current tax could this strategy save Jayzee? (Ignore any Social Security, Medicare, or self-employment tax issues.)How much income should be retained in the corporation? (Use tax rate schedule)

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Definitions:

Abstract Thinking

The ability to think about objects, principles, and ideas that are not physically present.

Logical Thinking

The process of using systematic reasoning to reach a conclusion or solve problems.

Irreversibility

In Piaget’s theory, the inability of the young child to mentally reverse an action.

Preoperational

The second stage in Piaget's theory of cognitive development, during which children start to use language to explore and understand their worlds but do not yet comprehend concrete logic.