In 2000, Craig and Kathy Koehler Owned a Small Business

question 27

Multiple Choice

In 2000, Craig and Kathy Koehler owned a small business which was held as a proprietorship in Kathy's name.They were thinking of incorporating if that would lower their total tax liability.The Koehlers expected the company to earn $100,000 before taxes next year.They planned to take out a salary of $45,000, and to reinvest the rest in the business.Their personal deductions total $10,750 and if they choose not to incorporate they will file a joint return.(1) What is their expected total tax liability as a proprietorship? (2) As a corporation? (3) Should they incorporate?

• A)$19,393.50; $22,250.00; No
• B)$19,393.50; $13,887.50; Yes
• C)$6,793.50; $6,637.50; Yes
• D)$22,403.50; $15,753.50; Yes
• E)$20,777.50; $22,250.00; No

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Definitions:

Commitments Exchange

A process where parties involved promise or pledge to engage in mutual exchanges of goods, services, or obligations.

Positive Bargaining Range

indicates a scenario in negotiation where the lowest amount the seller is willing to accept overlaps with the highest amount the buyer is willing to pay.

Squeeze Negotiations

Tactics used to pressure an opposing party into offering more favorable terms by exploiting their vulnerabilities.

Hardball Tactics

Methods or strategies in negotiations that are assertive and may involve pressure or coercion.