Jayzee Is a Single Taxpayer Who Operates a Sole Proprietorship

question 50

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 2020 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:

Division of Labor

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

Equitable Division

A method of dividing assets and debts fairly between parties in the dissolution of a partnership, such as a divorce.

Androgynous People

are individuals who do not fit neatly into the conventional male and female categories, often displaying a mix of masculine and feminine traits.

Gender-typed

Categorization of behaviors, preferences, or attributes based on societal norms for particular genders.